    [Historical Tables]
    [Introduction]
    [From the U.S. Government Printing Office, www.gpo.gov]

    [[Page 1]]

                                  INTRODUCTION

                        STRUCTURE, COVERAGE AND CONCEPTS

      Historical Tables provides a wide range of data on Federal Government
    finances. Many of the data series begin in 1940 and include estimates of
    the President's budget for 2005-2010. Additionally, Table 1.1 provides
    data on receipts, outlays, and surpluses or deficits for 1901-1939 and
    for earlier multi-year periods.

                                    Structure

      This document is composed of 17 sections, each of which has one or
    more tables. Each section covers a common theme. Section 1, for example,
    provides an overview of the budget and off-budget totals; Section 2
    provides tables on receipts by source; and Section 3 shows outlays by
    function. When a section contains several tables, the general rule is to
    start with tables showing the broadest overview data and then work down
    to more detailed tables. The purpose of these tables is to present a
    broad range of historical budgetary data in one convenient reference
    source and to provide relevant comparisons likely to be most useful. The
    most common comparisons are in terms of proportions (e.g., each major
    receipt category as a percentage of total receipts and of the gross
    domestic product).
      Section notes explain the nature of the activities covered by the
    tables in each section. Additional descriptive information is also
    included where appropriate. Explanations are generally not repeated, but
    there are occasional cross-references to related materials.
      Because of the numerous changes in the way budget data have been
    presented over time, there are inevitable difficulties in trying to
    produce comparable data to cover many years. The general rule is to
    provide data in as meaningful and comparable a fashion as possible. To
    the extent feasible, the data are presented on a basis consistent with
    current budget concepts. When a structural change is made, insofar as
    possible the data are adjusted for all years.
      One significant change made in the early 1990s concerns the budgetary
    treatment of Federal credit programs, which was changed by the Federal
    Credit Reform Act of 1990. Previously the budget recorded the cost of
    direct and guaranteed loans on a cash basis. Under credit reform, the
    budget only records budget authority and outlays for the subsidy cost of
    direct and guaranteed loans made in 1992 and subsequent years. The
    subsidy is defined as the net estimated cash flows to and from the
    Government over the life of the loan, discounted to the present. The
    cash transactions are recorded as a means of financing item. Because it
    was impossible to convert the pre-1992 loans to a credit reform basis,
    the data are on a cash basis for pre-1992 loans and on a credit reform
    basis for loans made in 1992 and subsequent years.

                                     Coverage

      The Federal Government has used the unified or consolidated budget
    concept as the foundation for its budgetary analysis and presentation
    since the 1969 budget. The basic guidelines for the unified budget were
    presented in the Report of the President's Commission on Budget Concepts
    (October 1967). The Commission recommended the budget include all
    Federal fiscal activities unless there were exceptionally persuasive
    reasons for exclusion. Nevertheless, from the very beginning some
    programs were perceived as warranting special treatment. Indeed, the
    Commission itself recommended a bifurcated presentation: a ``unified
    budget'' composed of an ``expenditure account'' and a ``loan account.''
    The distinction between the expenditure account and the loan account
    proved to be confusing and caused considerable complication in the
    budget for little benefit. As a result, this distinction was eliminated

    [[Page 2]]

    starting with the 1974 budget. However, even prior to the 1974 budget,
    the Export-Import Bank had been excluded by law from the budget totals,
    and other exclusions followed. The structure of the budget was gradually
    revised to show the off-budget transactions in many locations along with
    the on-budget transactions, and the off-budget amounts were added to the
    on-budget amounts in order to show total Federal spending.
      The Balanced Budget and Emergency Deficit Control Act of 1985 (Public
    Law 99-177) repealed the off-budget status of all then existing off-
    budget entities, but it also included a provision moving the Federal
    old-age, survivors, and disability insurance funds (collectively known
    as Social Security) off-budget. To provide a consistent time series, the
    budget historical data show Social Security off-budget for all years
    since its inception, and show all formerly off-budget entities on-budget
    for all years. The Omnibus Budget Reconciliation Act of 1989 (OBRA 1989)
    moved the Postal Service fund off-budget, starting in fiscal year 1989.
    Again to provide a consistent time series, transactions of the Postal
    Service fund are shown off-budget beginning with its inception in 1972.
    The transactions of its predecessor, the Post Office Department, remain
    on-budget.
      Though Social Security and the Postal Service are now off-budget, they
    continue to be Federal programs. Indeed, Social Security currently
    accounts for about one-fourth of all Federal receipts and over one-fifth
    of all Federal spending. Hence, the budget documents include these funds
    and focus on the Federal totals that combine the on-budget and off-
    budget amounts. Various budget tables and charts show total Federal
    receipts, outlays, and surpluses and deficits, and divide these totals
    between the portions that are on-budget and off-budget.

     Changes in Historical Budget Authority, Outlays, Receipts and Deficits

      The major budget totals for 1989 through 2003 have been revised to
    reflect corrections reported by the Department of the Treasury. These
    include revisions to more accurately report investments and cash held
    outside of the Treasury as well as corrections for the reporting of
    several transactions related to long term lease/leasebacks and
    prepayment agreements entered into by the Tennessee Valley Authority.
    There have also been minor adjustments to category and functional
    classifications in 2003 to correct reporting errors. In addition, data
    for the Postal Service for 1972 through 1988 have been reclassified as
    off-budget, consistent with the treatment of the Service for 1989
    forward. Transactions of the Post Office Department continue to be
    reflected as on-budget. Finally, transactions for the Telecommunications
    Development Fund, which were included in the Budget for the first time
    last year, are now reflected back to the fund's inception in 1996.

                   Constant Dollar Amounts and Percents of GDP

      The time series for fiscal year nominal Gross Domestic Product (GDP)
    has been revised to incorporate the benchmark revisions completed by the
    staff of the Bureau of Economic Analysis in the Department of Commerce.
    Corresponding revisions were made to the price indexes of various
    components of GDP. As a result, historical budget data expressed as a
    percent of GDP or in constant dollars have also been revised.

                             Note on the Fiscal Year

      The Federal fiscal year begins on October 1 and ends on the subsequent
    September 30. It is designated by the year in which it ends; for
    example, fiscal year 2002 began on October 1, 2001, and ended on
    September 30, 2002. Prior to fiscal year 1977 the Federal fiscal years
    began on July 1 and ended on June 30. In calendar year 1976 the July-
    September period was a separate accounting period (known as the
    transition quarter or TQ) to bridge the period required to shift to the
    new fiscal year.

                   Concepts Relevant to the Historical Tables

      Budget receipts constitute the income side of the budget; they are
    composed almost entirely of taxes or other compulsory payments to the
    Government. Any income from business-type activities (e.g., interest
    income or sale

    [[Page 3]]

    of electric power), and any income by Government accounts arising from
    payments by other Government accounts is offset against outlays, so that
    total budget outlays are reported net of offsetting collections. This
    method of accounting permits users to easily identify the size and
    trends in Federal taxes and other compulsory income, and in Federal
    spending financed from taxes, other compulsory income, or borrowing.
    Budget surplus refers to any excess of budget receipts over budget
    outlays, while budget deficit refers to any excess of budget outlays
    over budget receipts.
      The terms off-budget receipts, off-budget outlays, off-budget
    surpluses, and off-budget deficits refer to similar categories for off-
    budget activities. The sum of the on-budget and off-budget transactions
    constitute the consolidated or total Federal Government transactions.
      The budget is divided between two fund groups, Federal funds and trust
    funds. The Federal funds grouping includes all receipts and outlays not
    specified by law as being trust funds. All Federal funds are on-budget
    except for the Postal Service fund, which is off-budget starting with
    fiscal year 1989. All trust funds are on-budget, except the two Social
    Security retirement trust funds, which are shown off-budget for all
    years.
      The term trust fund as used in Federal budget accounting is frequently
    misunderstood. In the private sector, ``trust'' refers to funds of one
    party held by a second party (the trustee) in a fiduciary capacity. In
    the Federal budget, the term ``trust fund'' means only that the law
    requires the funds be accounted for separately and used only for
    specified purposes and that the account in which the funds are deposited
    is designated as a ``trust fund.'' A change in law may change the future
    receipts and the terms under which the fund's resources are spent. The
    determining factor as to whether a particular fund is designated as a
    ``Federal'' fund or ``trust'' fund is the law governing the fund.
      The largest trust funds are for retirement and social insurance (e.g.,
    civil service and military retirement, Social Security, Medicare, and
    unemployment benefits). They are financed largely by social insurance
    taxes and contributions and payments from the general fund (the main
    component of Federal funds). However, there are also major trust funds
    for transportation (highway and airport and airways) and for other
    programs financed in whole or in part by beneficiary-based, earmarked
    taxes.
      Sometimes there is confusion between budget receipts and offsetting
    receipts and offsetting collections. Receipts are income that results
    from the Government's exercise of its sovereign power to tax, or
    otherwise compel payment, or from gifts of money to the Government. They
    are also called governmental receipts or budget receipts. Offsetting
    collections and offsetting receipts result from either of two kinds of
    transactions: business-like or market-oriented activities with the
    public and intragovernmental transactions, the receipt by one Government
    account of a payment from another account.
      For example, the budget records the proceeds from the sale of postage
    stamps, the fees charged for admittance to recreation areas, and the
    proceeds from the sale of Government-owned land, as offsetting
    collections or offsetting receipts. An example of an intragovernmental
    transaction is the payments received by the General Services
    Administration from other Government agencies for the rent of office
    space. These are credited as offsetting collections in the Federal
    Buildings Fund. Offsetting collections and offsetting receipts are
    deducted from gross budget authority and outlays, rather than added to
    receipts. This treatment produces budget totals for receipts, budget
    authority, and outlays that represent governmental transactions with the
    public rather than market activity.
      When funds are earmarked, it means the receipts or collections are
    separately identified and used for a specified purpose--they are not
    commingled (in an accounting sense) with any other money. This does not
    mean the money is actually kept in a separate bank account. All money in
    the Treasury is merged for efficient cash management. However, any
    earmarked funds are accounted for in such a way that the balances are
    always identifiable and available for the stipulated purposes.
     ANNUAL UPDATE - CHANGE THE YEARS IN RUNNING HEADS (3 PLACES)
    deg.
    [[Page 5]]

                                HISTORICAL TRENDS

      Because the Historical Tables publication provides a large volume and
    wide array of data on Federal Government finances, it is sometimes
    difficult to perceive the longer term patterns in various budget
    aggregates and components. To assist the reader in understanding some of
    these longer term patterns, this section provides a short summary of the
    trends in Federal deficits and surpluses, debt, receipts, outlays and
    employment.
      Deficits and Debt.--As shown in Table 1.1, except for periods of war
    (when spending for defense increased sharply), depressions or other
    economic downturns (when receipts fell precipitously), the Federal
    budget was generally in surplus throughout most of the Nation's first
    200 years. For our first 60 years as a Nation (through 1849), cumulative
    budget surpluses and deficits yielded a net surplus of $70 million. The
    Civil War, along with the Spanish-American War and the depression of the
    1890s, resulted in a cumulative deficit totaling just under $1 billion
    during the 1850-1900 period. Between 1901 and 1916, the budget hovered
    very close to balance every year. World War I brought large deficits
    that totaled $23 billion over the 1917-1919 period. The budget was then
    in surplus throughout the 1920s. However, the combination of the Great
    Depression followed by World War II resulted in a long, unbroken string
    of deficits that were historically unprecedented in magnitude. As a
    result, Federal debt held by the public mushroomed from less than $3
    billion in 1917 to $16 billion in 1930 and then to $242 billion by 1946.
    In relation to the size of the economy, debt held by the public grew
    from 16% of GDP in 1930 to 109% in 1946.
      During much of the postwar period, this same pattern persisted--large
    deficits were incurred only in time of war (e.g., Korea and Vietnam) or
    as a result of recessions. As shown in Table 1.2, prior to the 1980s,
    postwar deficits as a percent of GDP reached their highest during the
    1975-76 recession at 4.2% in 1976. Debt held by the public had grown to
    $477 billion by 1976, but, because the economy had grown faster, debt as
    a percent of GDP had declined throughout the postwar period to a low of
    23.9% in 1974, climbing back to 27.5% in 1976. Following five years of
    deficits averaging 2.5% of GDP between 1977-1981, debt held by the
    public stood at 25.8% of GDP by 1981, only two percentage points higher
    than its postwar low.
      The traditional pattern of running large deficits only in times of war
    or economic downturns was broken during much of the 1980s. In 1982,
    partly in response to a recession, large tax cuts were enacted. However,
    these were accompanied by substantial increases in defense spending.
    Although reductions were made to nondefense spending, they were not
    sufficient to offset the impact on the deficit. As a result, deficits
    averaging $206 billion were incurred between 1983 and 1992. These
    unprecedented peacetime deficits increased debt held by the public from
    $789 billion in 1981 to $3.0 trillion (48.1% of GDP) in 1992.
      After peaking at $290 billion in 1992, deficits declined each year,
    dropping to a level of $22 billion in 1997. In 1998, the Nation recorded
    its first budget surplus ($69.2 billion) since 1969. As a percent of
    GDP, the budget bottom line went from a deficit of 4.7% in 1992 to a
    surplus of 0.8% in 1998, increasing to a 2.4% surplus in 2000. An
    economic slowdown began in 2001 and was exacerbated by the terrorists
    attacks of September 11, 2001. The deterioration in the performance of
    the economy together with income tax relief provided to help offset the
    economic slowdown and additional spending in response to the terrorist
    attacks produced a drop in the surplus to $128.2 billion (1.3% of GDP)
    and a return to deficits ($157.8 billion, 1.5% of GDP) in 2002. These
    factors also contributed to the increase in the deficit in the following
    two years to $412 billion and 3.6% of GDP in 2004, a level not seen
    since the early 1990s.

    [[Page 6]]

    Debt held by the public, which peaked at 49.4% of GDP in 1993, fell to
    33.0% in 2001 and increased to 37.2% in 2004.
      Receipts.-- From the beginning of the Republic until the start of the
    Civil War, our Nation relied on customs duties to finance the activities
    of the Federal Government. During the 19th Century, sales of public
    lands supplemented customs duties. While large amounts were occasionally
    obtained from the sale of lands, customs duties accounted for over 90%
    of Federal receipts in most years prior to the Civil War. Excise taxes
    became an important and growing source of Federal receipts starting in
    the 1860s. Estate and gift taxes were levied and collected sporadically
    from the 1860s through World War I, although never amounting to a
    significant source of receipts during that time. Prior to 1913, income
    taxes did not exist or were inconsequential, other than for a brief time
    during the Civil War period, when special tax legislation raised the
    income tax share of Federal receipts to as much as 13% in 1866.
    Subsequent to the enactment of income tax legislation in 1913, these
    taxes grew in importance as a Federal receipts source during following
    decade. By 1930, the Federal Government was relying on income taxes for
    60% of its receipts, while customs duties and excise taxes each
    accounted for 15% of the receipts total.
      During the 1930s, total Federal receipts averaged about 5% of GDP.
    World War II brought a dramatic increase in receipts, with the Federal
    receipts share of GDP peaking at 20.9% in 1944. The share declined
    somewhat after the war and has remained between 16% - 20% of GDP during
    most of this time. In recent years, receipts have increased as a share
    of GDP -- from 17.5% in 1992 to 20.9% in 2000, dropping back to 16.3% in
    2004. There have been some significant shifts during the post-war period
    in the underlying sources or composition of receipts.
      The increase in taxes needed to support the war effort in the 1940s
    saw the income tax rise to prominence as a source of Federal receipts,
    reaching nearly 80% of total receipts in 1944. After the war, the income
    tax share of total receipts fell from a postwar high of 74% in 1952 to
    an average of 64% in the late 1960s. The growth in social insurance
    taxes (such as Social Security and Medicare) more than offset a postwar
    secular decline in excise and other non-income tax shares. The
    combination of substantial reductions in income taxes enacted in the
    early 1980s and the continued growth in social insurance taxes resulted
    in a continued decline in the income tax share of total receipts. By
    1983 the income tax share had dropped to 54% of total receipts, where it
    remained until the mid-1990s. Since 1994, the income tax share of total
    receipts has increased, reaching 60% in 2000, before falling back to 53%
    by 2004.
      Corporation income taxes accounted for a large part of this postwar
    decline in total income tax share, falling from over 30% of total
    Federal receipts in the early 1950s to 20% in 1969. During the same
    period, pretax corporate profits fell from about 12% of GDP in the early
    1950s to 10% in 1968. By 1980 the corporation income tax share of total
    receipts had dropped to 12.5%. During the 1980s, pretax corporate
    profits declined as a percent of GDP and, thus, the corporation income
    tax share dropped to a low of 6.2% in 1983 By 1996, the share had
    climbed back to 11.8%. It dropped back to 7.4% by 2003, which was well
    below the 1980 share, before moving back to 10.1% in 2004. This sharp
    drop in corporation income tax share of total receipts was more than
    offset by the growth in social insurance taxes, as both tax rates and
    percentage of the workforce covered by these payroll taxes increased.
    Social insurance taxes increased from only 8% of total receipts during
    the mid-1940s to 38% by 1992, but declined to 32% by 2000 before rising
    to reattain a 39% share in 2004. Excise taxes have also declined in
    relative importance during the postwar period, falling from a 19% share
    in 1950 to about 4% currently.
      Outlays and Federal employment.--Throughout most of the Nation's
    history prior to the 1930s, the bulk of Federal spending went towards
    national defense, veterans benefits and interest on the public debt. In
    1929, for example, 71% of Federal outlays were in these three
    categories. The 1930s began with Federal outlays comprising just

    [[Page 7]]

    3.4% of GDP. As shown in Table 1.2, the efforts to fight the Great
    Depression with public works and other nondefense Federal spending, when
    combined with the depressed GDP levels, caused outlays and their share
    of GDP to increase steadily during most of that decade, with outlays
    rising to 10.3% of GDP by 1939 and to 12.0% by 1941 on the eve of U.S.
    involvement in World War II. Defense spending during World War II
    resulted in outlays as a percent of GDP rising sharply, to a peak of
    43.6% in 1944. The end of the war brought total spending down to 14.3%
    of GDP by 1949. Then the Korean war increased spending to an average
    19.5% of GDP for a few years in the early 1950s, but outlays as a
    percent of GDP then stabilized at around 17-19% until U.S. involvement
    in the Vietnam war escalated sharply in the middle 1960s and early
    1970s. From 1967 through 1971, Federal outlays averaged 19.6% of GDP.
    The decline in defense spending as a percent of GDP that began in 1971,
    as the Vietnam War began to wind down, was more than offset by increased
    spending on human resources programs during the 1970s--due to the
    maturation of the Social Security program and other longstanding income
    support programs, as well as a takeoff in spending on the recently
    enacted Great Society programs, such as Medicare and Medicaid--so that
    total spending increased as a percent of GDP, averaging 20% during the
    1970s (reflecting, in part, the substantial increase in grants to State
    and local governments during the 1970s). Since receipts were averaging
    18% of GDP during that decade, the result was chronic deficits averaging
    2% of GDP (contributing to this was the recession of 1975-76, which saw
    deficits increase to 4.2% in 1976).
      The 1980s began with substantial momentum in the growth of Federal
    nondefense spending in the areas of human resources, grants to State and
    local governments, and, as a result of the deficits incurred throughout
    the 1970s, interest on the public debt. In the early 1980s, a
    combination of substantially increased defense spending, continued
    growth in human resource spending, a tax cut and a recession caused the
    deficits to soar, which, in turn, sharply increased spending for
    interest on the public debt. Federal spending climbed to an average of
    22.8% of GDP during the 1981-1985 period. An end to the rapid defense
    buildup and a partial reversal of the tax cuts, along with a strong
    economy during the second half of the decade, brought Federal spending
    back down to 21.2% of GDP by 1989. In the early 1990s, another
    recession, in the face of continued rapid growth in Federal health care
    spending and additional spending resulting from the savings and loan
    crisis, caused the outlay share of GDP to average over 22.2% in 1991 and
    1992. Since then, this outlay growth trend was reversed. Outlays as a
    percent of GDP fell to 18.4% by 2000, but have risen to 19.8% in 2004,
    partially due to increased spending related to the global war on
    terrorism and the Iraq war.
      Despite the growth in total Federal spending as a percent of GDP in
    the postwar period, Federal Executive Branch employment, as shown in
    Table 17.1, has remained roughly constant, ranging from 1.6 to 2.3
    million civilian employees (excluding the Postal Service) throughout
    this period. The composition of employment has shifted dramatically
    between defense and civilian agencies over the last 35 years. In 1951,
    for example, of the 2.0 million employees, 1.2 million worked for the
    Department of Defense and 0.7 million worked for civilian agencies. By
    1974, Federal employment was split equally between defense and civilian
    agencies, with each accounting for 1.1 million employees. After a
    buildup in defense civilian employment in the 1980s, the shift away from
    defense to civilian agency employment resumed in the 1990s, so that by
    1999 civilian agency employment was 1.2 million and Department of
    Defense employment was 0.7 million, nearly the reverse of the
    proportions in 1951. Since 1992, when there were over 2.2 million
    civilians employed by the Federal Government, employment has been
    reduced by over 300 thousand, bringing Executive Branch employment down
    to 1.9 million in 2004.
      Although total spending has increased substantially as a percent of
    GDP since the 1950s, the growth in the various components of spending
    has not been even and, thus, the composition of spending has changed
    significantly during the same period.

    [[Page 8]]

      Discretionary spending totaled 12.7% of GDP in 1962, with three-
    fourths going to defense. Defense spending increased during the Vietnam
    War buildup in the late 1960s causing total discretionary outlays to
    rise to 13.6% of GDP by 1968, after which a secular decline began. By
    the middle 1970s, this category had dropped to 10% of GDP, where it
    hovered until the late 1980's, when the defense buildup that started
    early in that decade ended. As a percent of GDP, discretionary spending
    fell substantially over the 1990s, from 9.0% in 1991 to 6.3% in 1999.
    Since that time discretionary spending has increased, reaching 7.8% of
    GDP in 2004. While discretionary spending has followed a path of secular
    decline over the past 25 years, its major components--defense and
    nondefense--have contrasting histories.
      Defense discretionary spending was at 9.3% of GDP in 1962. As shown in
    Table 8.4, spending in this category had declined to 7.4% of GDP by
    1965, then increased as a result of the Vietnam War. After peaking at
    9.5% of GDP in 1968, it returned to the 1965 level by 1971. The decline
    continued throughout the 1970s, hitting a low point in this decade of
    4.7% of GDP in 1979. The defense buildup starting in the early 1980s
    boosted its percentage of GDP back to 6.2% by 1986, after which it again
    began a gradual decline throughout the rest of that decade. By 2000,
    defense discretionary spending stood at 3.0% of GDP, reflecting the
    impact of the end of the Cold War on our Nation's defense requirements
    and the significant economic growth during much of the 1990s. The
    current war against terrorism has begun to reverse partially this
    decline, with defense discretionary spending growing to 3.9% of GDP in
    2004.
      Nondefense discretionary spending as a percent of GDP has followed a
    much different path. In 1962, it stood at 3.4% of GDP. During the next
    few years it quickly increased, reaching 4.2% of GDP by 1967. It dropped
    slightly after that year, but still averaged about 4.0% of GDP until
    1975, when it surged to 4.5% of GDP due to the recession and partly due
    to growth in spending on energy, the environment, housing and other
    income support programs. Much of this growth was in the form of Federal
    grants to State and local governments. Additional grant spending arose
    from the creation of General Revenue Sharing in 1972 and various anti-
    recession grants at the end of the decade. Nondefense discretionary
    outlays peaked as a percent of GDP during the recession in 1980 at 5.2%.
    They declined sharply as a percent of GDP starting in 1982, falling to
    3.9% by 1985 and to 3.5% during the 1987-1991 period. Spending for these
    programs then increased slightly as a percent of GDP, climbing to 3.8%
    by 1993 before falling back in subsequent years, reaching a low of 3.2%
    in 1999. Growth in recent years has brought its share back to 3.8% by
    2004.
      Programmatic mandatory spending (which excludes net interest and
    undistributed offsetting receipts) accounts for a large part of the
    growth in total Federal spending as a percent of GDP since the 1950s.
    Major programs in this category include Social Security, Medicare,
    deposit insurance and means-tested entitlements (Medicaid, aid to
    dependent children, food stamps and other programs subject to an income
    test). Prior to the start of Medicare and Medicaid in 1966, this
    category averaged 5.7% of GDP between 1962 and 1965 (less than half the
    size of total discretionary spending), with Social Security accounting
    for nearly half. Within a decade, this category was comparable in size
    to total discretionary spending, nearly doubling as a percent of GDP to
    10.6% by 1976 (1.1% of which was for unemployment compensation that
    year).
      Although part of this growth represented the impact of the 1975-76
    recession on GDP levels and outlays for unemployment compensation, the
    largest part was due to growth in Social Security, Medicare and
    Medicaid. These three programs totaled 3.4% of GDP in 1968 and grew
    rapidly to 5.5% of GDP by 1976. While Social Security stabilized as a
    percent of GDP during 1985-1997, ranging from 4.3% to 4.6%, the growth
    in other programmatic mandatory spending has continued to outpace the
    growth in GDP since the mid-1970s (apart from recession recovery
    periods) due largely to Medicare and Medicaid. These two programs, which
    were 1.2% of GDP in 1975, have more than doubled as a percent of GDP
    since

    [[Page 9]]

    then, reaching 3.5% in 1997, dropping slightly to 3.2% in 1999 and 2000,
    before rising to 3.4% in 2001 and to 3.8% in 2003 and 2004. Excluding
    Medicaid, spending for means-tested entitlements in 2004 was at 1.3%
    percent of GDP, nearly the same as it was over twenty-five years ago in
    1975. By way of contrast, the remaining programmatic mandatory spending
    -- i.e, excluding Medicare, unemployment compensation, Social Security,
    deposit insurance and means-tested entitlements -- has been more than
    halved as a percent of GDP, falling from 3.2% in 1975 to no more than
    1.5% during the past ten years. (Major programs in this grouping include
    Federal employee and railroad retirement, farm price supports and
    veterans' compensation and readjustment benefits.) Nevertheless, total
    programmatic mandatory spending in 2004 was at 11.2% of GDP compared to
    7.8% for total discretionary spending.
      Additional perspectives on spending trends available in this document
    include spending by agency, by function and subfunction and by
    composition of outlays categories, which include payments for
    individuals and grants to State and local governments.
     ANNUAL UPDATE - CHANGE THE YEARS IN RUNNING HEADS (3 PLACES)
    deg.
    [[Page 11]]

                                  SECTION NOTES

           Notes on Section 1 (Overview of Federal Government Finances)

      This section provides an overall perspective on total receipts,
    outlays (spending), and surpluses or deficits. Off-budget transactions,
    which consist of the Social Security trust funds and the Postal Service
    fund, and on-budget transactions, which equal the total minus the off-
    budget transactions, are shown separately. Tables 1.1 and 1.2 have
    similar structures; 1.1 shows the data in millions of dollars, while 1.2
    shows the same data as percentages of the gross domestic product (GDP).
    For all the tables using GDP, fiscal year GDP is used to calculate
    percentages of GDP. The fiscal year GDP data are shown in Table 1.2.
    Additionally, Table 1.1 shows budget totals annually back to 1901 and
    for multi-year periods back to 1789.
      Table 1.3 shows total Federal receipts, outlays, and surpluses or
    deficits in current and constant (Fiscal Year 2000=100) dollars, and as
    percentages of GDP. Section 6 provides a disaggregation of the constant
    dollar outlays.
      Table 1.4 shows receipts, outlays and surpluses or deficits for the
    consolidated budget by fund group. The budget is composed of two
    principal fund groups--Federal funds and trust funds. Normally, whenever
    data are shown by fund group, any payments from programs in one fund
    group to accounts of the other are shown as outlays of the paying fund
    and receipts of the collecting fund. When the two fund groups are
    aggregated to arrive at budget totals these interfund transactions are
    deducted from both receipts and outlays in order to arrive at
    transactions with the public. Table 1.4 displays receipts and outlays on
    a gross basis. That is, in contrast to normal budget practice,
    collections of interfund payments are included in the receipts totals
    rather than as offsets to outlays. These interfund collections are
    grossed-up to more closely approximate cash income and outgo of the fund
    groups.

         Notes on Section 2 (Composition of Federal Government Receipts)

      Section 2 provides historical information on on-budget and off-budget
    receipts. Table 2.1 shows total receipts divided into five major
    categories; it also shows the split between on-budget and off-budget
    receipts. Table 2.2 shows the receipts by major category as percentages
    of total receipts, while Table 2.3 shows the same categories of receipts
    as percentages of GDP. Table 2.4 disaggregates two of the major receipts
    categories, social insurance taxes and contributions and excise taxes,
    and Table 2.5 disaggregates the ``other receipts'' category. While the
    focus of the section is on total Federal receipts, auxiliary data show
    the amounts of trust fund receipts in each category, so it is possible
    to readily distinguish the Federal fund and trust fund portions.

           Notes on Section 3 (Federal Government Outlays by Function)

      Section 3 displays Federal Government outlays (on-budget and off-
    budget) according to their functional classification. The functional
    structure is divided into 18 broad areas (functions) that provide a
    coherent and comprehensive basis for analyzing the budget. Each
    function, in turn, is divided into basic groupings of programs entitled
    subfunctions. The structure has two categories--allowances and
    undistributed offsetting receipts--that are not truly functions but are
    required in order to cover the entire budget. At times a more summary
    presentation of functional data is needed; the data by ``superfunction''
    is produced to satisfy this need. Table 3.1 provides outlays by
    superfunction and function while Table 3.2 shows outlays by function and
    subfunction.
      In arraying data on a functional basis, budget authority and outlays
    are classified according to the primary purpose of the activity. To the
    extent feasible, this classification is made without regard to agency or

    [[Page 12]]

    organizational distinctions. Classifying each activity solely in the
    function defining its most important purpose--even though many
    activities serve more than one purpose--permits adding the budget
    authority and outlays of each function to obtain the budget totals. For
    example, Federal spending for Medicaid constitutes a health care
    program, but it also constitutes a form of income security benefits.
    However, the spending cannot be counted in both functions; since the
    main purpose of Medicaid is to finance the health care of the
    beneficiaries, this program is classified in the ``health'' function.
    Section 3 provides data on budget outlays by function, while Section 5
    provides comparable data on budget authority.

            Notes on Section 4 (Federal Government Outlays by Agency)

      Section 4 displays Federal Government outlays (on- and off-budget) by
    agency. Table 4.1 shows the dollar amounts of such outlays, and Table
    4.2 shows the percentage distribution. The outlays by agency are based
    on the agency structure currently in effect. For example, the Department
    of Homeland Security was established by legislation enacted in 2002.
    However, these data show spending by the Department of Homeland Security
    in previous years that consists of spending attributable to predecessor
    agencies in earlier years, but now attributable to the Department of
    Homeland Security.

            Notes on Section 5 (Budget Authority--On- and Off-Budget)

      Section 5 provides data on budget authority (BA). BA is the authority
    provided by law for agencies to obligate the Government to spend. Table
    5.1 shows BA by function and subfunction, starting with 1976. Table 5.2
    provides the same information by agency, and Table 5.3 provides a
    percentage distribution of BA by agency. Tables 5.4 and 5.5 provide the
    same displays as Tables 5.2 and 5.3, but for discretionary budget
    authority rather than total budget authority. (Discretionary refers to
    the Budget Enforcement Act category that includes programs subject to
    the annual appropriations process.)
      The data in these tables were compiled using the same methods used for
    the historical tables for receipts and outlays (e.g., to the extent
    feasible, changes in classification are reflected retroactively so the
    data show the same stream of transactions in the same location for all
    years). However, BA is heterogeneous in nature, varying significantly
    from one program to another. As a result, it is not additive--either
    across programs or agencies for a year or, in many cases, for an agency
    or program across a series of years--in the same sense that budget
    receipts and budget outlays are additive. The following are examples of
    different kinds of BA and the manner in which BA results in outlays.
      BA and outlays for each year may be exactly the same (e.g.,
              interest on the public debt).
      For each year the Congress may appropriate a large quantity of
              BA that will be spent over a subsequent period of years (e.g.,
              many defense procurement contracts and major construction
              programs).
      Some BA (e.g., the salaries and expenses of an operating
              agency) is made available only for a year and any portion not
              obligated during that year lapses (i.e., it ceases to be
              available to be obligated).
      Revolving funds may operate spending programs indefinitely
              with no new infusion of BA, other than the authority to spend
              offsetting collections.
      BA may be enacted with the expectation it is unlikely ever to
              be used (e.g., standby borrowing authority).
      All income to a fund (e.g., certain revolving, special, and
              trust funds) may be permanently appropriated as BA; as long as
              the fund has adequate resources, there is no further
              relationship between the BA and outlays.
      As a result of the Budget Enforcement Act of 1990, the
              measurement of BA changed in most special and trust funds with
              legislatively imposed limitations or benefit formulas that
              constrain the use of BA. Where previously budget authority was
              the total income to the fund, BA in these funds for 1990 and
              subsequent years is now an esti

    [[Page 13]]

              mate of the obligations to be incurred during the fiscal year
              for benefit payments, administration and other expenses of the
              fund. In some, but not all, cases it was possible to adjust BA
              figures for these funds for years prior to 1990 to conform to
              the current concepts.
      Although major changes in the way BA is measured for credit
              programs (beginning in 1992) result from the Budget
              Enforcement Act, these tables could not be reconstructed to
              show revised BA figures for 1991 and prior years on the new
              basis.
      In its earliest years, the Federal Financing Bank (FFB) was
              conducted as a revolving fund, making direct loans to the
              public or purchasing loan assets from other funds or accounts.
              Each new loan by the FFB required new BA. In many cases, if
              the same loan were made by the account being serviced by the
              FFB, the loan could be financed from offsetting collections
              and no new BA would be recorded. Under terms of the 1985
              legislation moving the FFB on-budget, the FFB ceased to make
              direct loans to the public. Instead, it makes loans to the
              accounts it services, and these accounts, in turn, make the
              loans to the public. Such loans could be made from new BA or
              other obligational authority available to the parent account.
              These tables have not been reconstructed to shift BA
              previously scored in the FFB to the parent accounts, because
              there is no technical way to reconfigure the data.
      Despite these qualifications there is a desire for historical data on
    BA, and this section has been developed to meet that desire. Budget
    authority data are also provided by function in Table 8.9 for various
    discretionary program groupings.

         Notes on Section 6 (Composition of Federal Government Outlays)

      The ``composition'' categories in this section divide total outlays
    (including Social Security) into national defense and nondefense
    components, and then disaggregate the nondefense spending into several
    parts:
      Payments for individuals: These are Federal Government
              spending programs designed to transfer income (in cash or in
              kind) to individuals or families. To the extent feasible, this
              category does not include reimbursements for current services
              rendered to the Government (e.g., salaries and interest). The
              payments may be in the form of cash paid directly to
              individuals or they may take the form of the provision of
              services or the payment of bills for activities largely
              financed from personal income. They include outlays for the
              provision of medical care (in veterans hospitals, for example)
              and for the payment of medical bills (e.g., Medicare). They
              also include subsidies to reduce the cost of housing below
              market rates, and food and nutrition assistance (such as food
              stamps). The data base, while not precise, provides a
              reasonable perspective of the size and composition of income
              support transfers within any particular year and trends over
              time. Section 11 disaggregates the components of this
              category. The data in Section 6 show a significant amount of
              payments for individuals takes the form of grants to State and
              local governments to finance benefits for the ultimate
              recipients. These grants include Medicaid, some food and
              nutrition assistance, and a significant portion of the housing
              assistance payments. Sections 11 and 12 provide a more
              detailed disaggregation of this spending.
      All other grants to State and local governments: This category
              consists of the Federal nondefense grants to State and local
              governments other than grants defined as payments for
              individuals. Section 12 disaggregates this spending.
      Net interest: This category consists of all spending
              (including offsetting receipts) included in the functional
              category ``net interest.'' Most spending for net interest is
              paid to the public as interest on the Federal debt. As shown
              in Table 3.2, net interest includes, as an offset, significant
              amounts of interest income.
      All other: This category consists of all remaining Federal
              spending and offsetting receipts except for those included in
              the category ``undistributed offsetting receipts.'' It
              includes most Federal loan activities and most Federal
              spending for for

    [[Page 14]]

              eign assistance, farm price supports, medical and other
              scientific research, and, in general, Federal direct program
              operations.
      Undistributed offsetting receipts: These are offsetting
              receipts that are not offset against any specific agency or
              programmatic function. They are classified as function 950 in
              the functional tables. Additional details on their composition
              can be found at the end of Table 3.2.
      Table 6.1 shows these outlays in current and constant dollars, the
    percentage distribution of current dollar outlays, and the current
    dollar outlays as percentages of GDP. The term ``constant dollars''
    means the amounts of money that would have had to be spent in each year
    if, on average, the unit cost of everything purchased within that
    category each year (including purchases financed by income transfers,
    interest, etc.) were the same as in the base year (fiscal year 2000).
    The adjustments to constant dollars are made by applying a series of
    chain-weighted price indexes to the current dollar data base. The
    composite total outlays deflator is used to deflate current dollar
    receipts to produce the constant dollar receipts in Table 1.3. The
    separate composite deflators used for the various outlay categories are
    shown in Table 10.1.

                        Notes on Section 7 (Federal Debt)

      This section provides information about Federal debt. Table 7.1
    contains data on gross Federal debt and its major components in terms of
    both the amount of debt outstanding at the end of each year and that
    amount as a percentage of fiscal year GDP.
      Gross Federal debt is composed both of Federal debt held (owned) by
    the public and Federal debt held by Federal Government accounts, which
    is mostly held by trust funds. Federal debt held by the public consists
    of all Federal debt held outside the Federal Government accounts. For
    example, it includes debt held by individuals, private banks and
    insurance companies, the Federal Reserve Banks, and foreign central
    banks. The sale (or repayment) of Federal debt to the public is the
    principal means of financing a Federal budget deficit (or disposing of a
    Federal budget surplus).
      The Federal Government accounts holding the largest amount of Federal
    debt securities are the civil service and military retirement, Social
    Security, and Medicare trust funds. However, significant amounts are
    also held by some other Government accounts, such as the unemployment
    and highway trust funds.
      Table 7.1 divides debt held by the public between the amount held by
    the Federal Reserve Banks and the remainder. The Federal Reserve System
    is the central bank for the Nation. Their holdings of Federal debt are
    shown separately because they do not have the same impact on private
    credit markets as does other debt held by the public. They accumulate
    Federal debt as a result of their role as the country's central bank,
    and the size of these holdings has a major impact on the Nation's money
    supply. Since the Federal budget does not forecast Federal Reserve
    monetary policy, it does not project future changes in the amounts of
    Federal debt that will be held by the Federal Reserve Banks. Hence, the
    split of debt held by the public into that portion held by the Federal
    Reserve Banks and the remainder is provided only for past years. Table
    2.5 shows deposits of earnings by the Federal Reserve System. Most
    interest paid by Treasury on debt held by the Federal Reserve Banks is
    returned to the Treasury as deposits of earnings, which are recorded as
    budget receipts.
      As a result of a conceptual revision in the quantification of Federal
    debt, the data on debt held by the public and gross Federal debt--but
    only a small part of debt held by Government accounts--were revised back
    to 1956 in the 1990 budget. The total revision was relatively small--a
    change of under one percent of the recorded value of the debt--but the
    revised basis is more consistent with the quantification of interest
    outlays, and provides a more meaningful measure of Federal debt. The
    change converted most debt held by the public from the par value to the
    sales price plus amortized discount.
      Most debt held by Government accounts is issued at par, and securities
    issued at

    [[Page 15]]

    a premium or discount were formerly recorded at par. However, zero-
    coupon bonds are recorded at estimated market or redemption price.
    Starting in 1989, other debt held by Government accounts is adjusted for
    any initial discount.
      Table 7.2 shows the end-of-year amounts of Federal debt subject to the
    general statutory limitation. It is recorded at par value (except for
    savings bonds) through 1988, but by law the basis was changed, in part,
    to accrual value for later years. Before World War I, each debt issue by
    the Government required specific authorization by the Congress. Starting
    in 1917, the nature of this limitation was modified in several steps
    until it developed into a limit on the total amount of Federal debt
    outstanding. The Treasury is free to borrow whatever amounts are needed
    up to the debt limit, which is changed from time to time to meet new
    requirements. Table 7.3 shows the ceiling at each point in time since
    1940. It provides the specific legal citation, a short description of
    the change, and the amount of the limit specified by each Act. Most, but
    not all, of gross Federal debt is subject to the statutory limit.

         Notes on Section 8 (Outlays by Budget Enforcement Act Category)

      Section 8 is composed of nine tables, eight of which present outlays
    by the major categories used under the Budget Enforcement Act (BEA) and
    under previous budget agreements between Congress and the current and
    previous Administrations. The final table presents discretionary budget
    authority. (Discretionary budget authority is shown on an agency basis
    in Section 5, Table 5.4 and Table 5.5.) Table 8.1 shows Federal outlays
    within each of the categories and subcategories. The principal
    categories are outlays for mandatory and related programs and outlays
    for discretionary programs. Mandatory and related programs include
    direct spending and offsetting receipts whose budget authority is
    provided by law other than appropriations acts. These include
    appropriated entitlements and the food stamp program, which receive pro
    forma appropriations. Discretionary programs are those whose budgetary
    resources (other than entitlement authority) are provided in
    appropriations acts. The table shows two major categories of
    discretionary programs: Defense (Function 050) and Nondefense (all other
    discretionary programs). A third category, Proposed Supplemental shows
    the allowance for an anticipated supplemental budget request in 2005.
    Funds for both defense and nondefense are included in the supplemental
    amounts. Table 8.2 has the same structure, but shows the data in
    constant (FY 2000) dollars. Table 8.3 shows the percentage distribution
    of outlays by BEA category and Table 8.4 shows outlays by BEA category
    as a percentage of GDP.
      Table 8.5 provides additional detail by function and/or subfunction
    for mandatory and related programs. Table 8.6 shows the same data in
    constant dollars.
      Table 8.7 provides additional detail by function and/or subfunction on
    outlays for discretionary programs. Table 8.8 provides the same data in
    constant dollars. Table 8.9 provides function and/or subfunction detail
    on budget authority for discretionary programs.

       Notes on Section 9 (Federal Government Outlays for Major Physical
         Capital, Research and Development, and Education and Training)

      Tables in this section provide a broad perspective on Federal
    Government outlays for public physical capital, the conduct of research
    and development (R&D), and education and training. These data measure
    new Federal spending for major public physical assets, but they exclude
    major commodity inventories. In some cases it was necessary to use
    supplementary data sources to estimate missing data in order to develop
    a consistent historical data series. The data for the conduct of
    research and development exclude outlays for construction and major
    equipment because such spending is included in outlays for physical
    capital.
      Table 9.1 shows total investment outlays for major public physical
    capital, R&D, and education and training in current and constant (FY
    2000) dollars, and shows the percentage distribution of outlays and
    outlays as a

    [[Page 16]]

    percentage of GDP. Table 9.2 focuses on direct Federal outlays and
    grants for major public physical capital investment in current and
    constant (FY 2000) dollars, disaggregating direct Federal outlays into
    national defense and nondefense capital investment. Table 9.3 retains
    the same structure as 9.2, but shows direct Federal outlay totals for
    physical capital investment as percentages of total outlays and as
    percentages of GDP. Table 9.4 disaggregates national defense direct
    outlays, while Table 9.5 disaggregates nondefense outlays for major
    public physical capital investment. Table 9.6 shows the composition of
    grant outlays for major public physical capital investment.
      Table 9.7 provides an overall perspective on Federal Government
    outlays for the conduct of R&D. It shows total R&D spending and the
    split between national defense and nondefense spending in four forms: in
    current dollars, in constant dollars, as percentages of total outlays,
    and as percentages of GDP. Table 9.8 shows outlays in current dollars by
    major function and program.
      Table 9.9 shows outlays for the conduct of education and training in
    current dollars for direct Federal programs and for grants to State and
    local governments. Total outlays for the conduct of education and
    training as a percentage of Federal outlays and in constant (FY 2000)
    dollars are also shown. As with the series on physical capital, several
    budget data sources have been used to develop a consistent data series
    extending back to 1962. A discontinuity occurs between 1991 and 1992 and
    affects primarily direct Federal higher education outlays. For 1991 and
    earlier, these data include net loan outlays. Beginning in 1992,
    pursuant to changes in the treatment of loans as specified in the Credit
    Reform Act of 1990, this series includes outlays for loan repayments and
    defaults for loans originated in 1991 and earlier and credit subsidy
    outlays for loans originated in 1992 and later years.
      Table 9.9 also excludes education and training outlays for physical
    capital (which are included in Table 9.7) and education and training
    outlays for the conduct of research and development (which are in Table
    9.8). Also excluded are education and training programs for Federal
    civilian and military personnel.

                 Notes on Section 10 (Implicit Outlay Deflators)

      Section 10 consists of Table 10.1, Gross Domestic Product and
    Deflators Used in the Historical Tables, which shows the various
    implicit deflators used to convert current dollar outlays to constant
    dollars. The constant dollar deflators are based on chain-weighted (FY
    2000 chained-dollars) price indexes derived from the National Income and
    Product Accounts data.

        Notes on Section 11 (Federal Government Payments for Individuals)

      This section provides detail on outlays for Federal Government
    payments for individuals, which are also described in the notes on
    Section 6. The basic purpose of the payments for individuals aggregation
    is to provide a broad perspective on Federal cash or in-kind payments
    for which no current service is rendered yet which constitutes income
    transfers to individuals and families. Table 11.1 provides an overview
    display of these data in four different forms. All four of these
    displays show the total payments for individuals, and the split of this
    total between grants to State and local governments for payments for
    individuals (such as Medicaid and grants for housing assistance) and all
    other (``direct'') payments for individuals.
      Table 11.2 shows the functional composition of payments for
    individuals (see notes on Section 3 for a description of the functional
    classification), and includes the same grants versus nongrants
    (``direct'') split provided in Table 11.1. The off-budget Social
    Security program finances a significant portion of the Federal payments
    for individuals. These tables do not distinguish between the on-budget
    and off-budget payments for individuals. However, all payments for
    individuals shown in Table 11.2 in function 650 (Social Security) are
    off-budget outlays, and all other payments for individuals are on-
    budget. Table 11.3 displays the payments for individuals by major
    program category.

    [[Page 17]]

       Notes on Section 12 (Federal Grants To State and Local Governments)

      For several decades the Federal budget documents have provided data on
    Federal grants to State and local governments. The purpose of these data
    is to identify Federal Government outlays that constitute income to
    State and local governments to help finance their services and their
    income transfers (payments for individuals) to the public. Grants
    generally exclude Federal Government payments for services rendered
    directly to the Federal Government; for example, they exclude most
    Federal Government payments for research and development, and they
    exclude payments to State social service agencies for screening
    disability insurance beneficiaries for the Federal disability insurance
    trust fund.
      Table 12.1 provides an overall perspective on grants; its structure is
    similar to the structure of Table 11.1.
      Table 12.2 displays Federal grants by function (see notes on Section 3
    for a description of the functional classification). The bulk of Federal
    grants are included in the Federal funds group; however, since the
    creation of the highway trust fund in 1957, significant amounts of
    grants have been financed from trust funds (see notes to Section 1 for a
    description of the difference between ``Federal funds'' and ``trust
    funds''). All Federal grants are on-budget. Wherever trust fund outlays
    are included in those data, Table 12.2 not only identifies the total
    grants by function but also shows the split between Federal funds and
    trust funds.
      Table 12.3 provides data on grants at the account or program level,
    with an identification of the function, agency, and fund group of the
    payment.

               Notes on Section 13 (Social Security and Medicare)

      Over the past several decades the Social Security programs (the
    Federal old-age and survivors insurance (OASI) and the Federal
    disability insurance (DI) trust funds) and the Medicare programs (the
    Federal hospital insurance (HI) and the Federal supplementary medical
    insurance (SMI) trust funds) have grown to be among the largest parts of
    the Federal budget. Because of the size, the rates of growth, and the
    specialized financing of these programs, policy analysts frequently wish
    to identify these activities separately from all other Federal taxes and
    spending. As discussed in the introductory notes, the two Social
    Security funds are off-budget, while the Medicare funds are on-budget.
    As Table 13.1 shows, the first of these funds (OASI) began in 1937. The
    table shows the annual transactions of that fund and of the other funds
    beginning with their points of origin.
      The table provides detailed information about Social Security and
    Medicare by fund. It shows total cash income (including offsetting
    receipts) by fund, separately identifying social insurance taxes and
    contributions, intragovernmental income, and proprietary receipts from
    the public. Virtually all of the proprietary receipts from the public,
    especially those for the supplementary medical insurance trust fund, are
    Medicare insurance premiums. The table shows the income, outgo, and
    surplus or deficit of each fund for each year, and also shows the
    balances of the funds available for future requirements. Most of these
    fund balances are invested in public debt securities and constitute a
    significant portion of the debt held by Government accounts (see Table
    7.1).
      The SMI fund, which was established in 1967, is financed primarily by
    payments from Federal funds and secondarily by medical insurance
    premiums (proprietary receipts from the public). The other three trust
    funds are financed primarily by social insurance taxes. The law
    establishing the rate and base of these taxes allocates the tax receipts
    among the three funds.
      The table shows significant transfers by OASI and DI to the railroad
    retirement Social Security equivalent account. These transfers are equal
    to the additional amounts of money Social Security would have had to
    pay, less additional receipts it would have collected, if the rail labor
    force had been included directly under Social Security since the
    inception of the Social Security program.

    [[Page 18]]

      In 1983, when the OASI fund ran short of money, Congress passed
    legislation that (a) provided for a one-time acceleration of military
    service credit payments to these trust funds, (b) provided for a Federal
    fund payment to OASDI for the estimated value of checks issued in prior
    years and charged to the trust funds but never cashed, (c) required that
    the Treasury make payments to OASDHI on the first day of the month for
    the estimated amounts of their social insurance taxes to be collected
    over the course of each month (thereby increasing each affected trust
    fund's balances at the beginning of the month), and (d) subjected some
    Social Security benefits to Federal income or other taxes and provided
    for payments by Federal funds to Social Security of amounts equal to
    these additional taxes. Additionally, in 1983 the OASI fund borrowed
    from the DI and HI funds (the tables show the amounts of such borrowing
    and repayments of borrowing). The large intragovernmental collections by
    OASDHI in 1983 are a result of the transactions described under (a) and
    (b) above. Also starting in 1983, OASI began paying interest to DI and
    HI to reimburse them for the balances OASI borrowed from them; OASDHI
    paid interest to Treasury to compensate it for the balances transferred
    to these funds on the first day of each month. The legal requirement for
    Treasury to make payments on the first day of the month, and the
    associated interest payment, ended in 1985 for HI and in 1991 for OASI
    and DI.

    Notes on Section 14 (Federal Sector Transactions in the National Income
                              and Product Accounts)

      The principal system used in the United States for measuring total
    economic activity is the system of national income and product accounts
    (NIPA), which provide calculations of the GDP and related data series.
    These data are produced by the Bureau of Economic Analysis (BEA) of the
    Department of Commerce. As part of this work the BEA staff analyze the
    budget data base and estimate transactions consistent with this
    measurement system. The NIPA data are normally produced for calendar
    years and quarters. Section 14 provides Federal Sector NIPA data on a
    fiscal year basis. The main body of the table shows the components of
    Current Receipts and Expenditures. An addendum shows Total Receipts and
    Expenditures starting in fiscal year 1960.

      Notes on Section 15 (Total (Federal and State and Local) Government
                                    Finances)

      Section 15 provides a perspective on the size and composition of total
    Government (Federal, State, and local) receipts and spending. Both the
    Bureau of the Census and the Bureau of Economic Analysis in the Commerce
    Department provide information (in the national income and product
    accounts (NIPA) data) on income and spending for all levels of
    government in the United States. The tables in this section include the
    NIPA State and local transactions with the Federal Government (deducting
    the amount of overlap due to Federal grants to State and local
    governments) to measure total Government receipts and spending on a
    fiscal year basis. The NIPA State and local government receipts and
    expenditures have been adjusted to be more comparable to the Federal
    unified budget receipts and outlays by using State and local government
    Total Expenditures, by including NIPA Capital Receipts from Estate and
    Gift taxes, and by displaying interest receipts as an offset to
    expenditures.

                  Notes on Section 16 (Federal Health Spending)

      Section 16 consists of Table 16.1, Total Outlays for Health Programs.
    This table shows a broad definition of total Federal health spending by
    type of health program, including defense and veterans health programs,
    Medicare, Medicaid, Federal employees' health benefits and other health
    spending. It also shows Federal health spending as percentages of total
    outlays and of GDP.

                    Notes on Section 17 (Federal Employment)

      Section 17 provides an overview of the size and scope of the Federal
    work force. The measures of Federal employment currently in use are end-
    strength and full-

    [[Page 19]]

    time equivalents (FTEs). End-strength is the measure of total positions
    filled at the end of the fiscal year, representing a ``head count'' of
    all paid employees.
      Federal employment in the Executive Branch, however, is controlled on
    the basis of FTEs. Full-time equivalent (FTE) employment is the measure
    of the total number of regular (non-overtime) hours worked by an
    employee divided by the number of compensable hours applicable to each
    fiscal year. A typical FTE workyear is equal to 2,080 hours. Put simply,
    one full-time employee counts as one FTE, and two employees who work
    half-time count as one FTE. FTE data have been collected for Executive
    Branch agencies since 1981.
      The tables included in this section illustrate the size of the
    governmental work forces utilizing these measures. Table 17.1 shows the
    end-strength of the Executive Branch and selected agencies starting in
    1940. Table 17.2 shows the end-strength of the Executive Branch and
    selected agencies as a percentage of total Executive Branch employment
    starting in 1940. Table 17.3 shows FTEs for the Executive Branch and
    selected agencies for 1981 and subsequent years; Table 17.4 shows these
    FTEs as a percentage of total Executive Branch FTEs. Table 17.5 shows a
    comparison of the end-strengths of Federal employment and State and
    local government employment, and the total of the two as a percentage of
    the U.S. population in each year.