The Budget for Fiscal Year 2001

Order Code RL31461

Report for Congress

Received through the CRS Web

The Budget for Fiscal Year 2001

January 18, 2002

Philip D. Winters

Analyst in Government Finance

Government and Finance Division

Congressional Research Service ˜ The Library of Congress

The Budget for Fiscal Year 2001

Summary

On February 7, 2000, President Clinton submitted the original budget for

FY2001, proposing receipts of $2,019 billion, outlays of $1,835 billion, and a surplus

of $184 billion. The Administration’s proposals included a multitude of large and

small policy changes to both revenues and outlays were projected to preserve a

substantial surplus over the 10-year budget period.

A week earlier, in January 2000, CBO released its baseline estimates for

FY2001 in the Budget and Economic Outlook: Fiscal Years 2001-2010. It contained

three budget baselines for the next 10 years. The surplus estimates for FY2001

ranged from $177 billion to $235 billion, based on different assumptions about the

growth in discretionary spending.

Congress adopted the conference report on the FY2001 budget resolution

(H.Con.Res. 290; H.Rept. 106-577) on April 13, 2000. The resolution set spending

and revenue targets for the year, resulting in a surplus of $170 billion. It included

instructions for two tax-cut reconciliation bills totaling $150 billion over 5 years.

President Clinton vetoed both tax cut bills (H.R. 4810 and H.R. 8).

In the fall of 2000, Congress and President Clinton argued over the content and

size of the appropriations for FY2001. On December 15, 2000, Congress reached an

agreement with the President and passed the remaining appropriations (the

Consolidated Appropriations Act; P.L. 106-554; H.R. 4577; H.Rept. 106-1033) for

FY2001. The legislation, including tax cuts ($31.5 billion over 10 years), completed

budget action in the 106th Congress for FY2001. This legislation followed a series

of continuing resolutions on appropriations that funded those parts of the government

not covered by regular appropriations or permanent funding during the fall. The

fiscal year had begun with only two of the 13 regular appropriations enacted into law.

In 2001 the congressional budget resolution for FY2002 (H.Con.Res. 83; May

10, 2001) included a revised surplus for FY2001 of $186 billion resulting from an

included proposed tax cut. The tax cut cleared Congress on May 26 (the Economic

Growth and Tax Relief Reconciliation Act of 2001; P.L. 107-16; May 2001). CBO

estimated that it would reduce the FY2001 surplus by $74 billion.

In August 2001, both the Administration and the Congressional Budget Office

(CBO) released revised, final estimates for FY2001 within their updated FY2002

budget reports. These estimates reflected a continuing weak economy, technical

changes, and the effects of the tax cut (P.L. 107-16) and other legislation, and

revealed lower expected surpluses for FY2001, ranging from $153 billion to $158

billion. (In early 2001, the surplus estimates for FY2001 had risen as high as $281

billion (CBO baseline estimates, January 2001)). The September 2001 $40 billion

emergency supplemental appropriation, in response to the terrorist attacks, had little

effect on the FY2001 outlays. Final budget totals for FY2001, included a $127

billion surplus, $1,991 billion in receipts, and $1,864 billion in outlays. This report

is designed for historical background information and will not be updated.

Contents

Budget Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Uncertainty in Budget Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Budget Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Outlays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Baseline Discretionary Outlays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Surpluses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Recent Surplus/Deficit History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

The Budget and the Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

List of Tables

Table 1. Budget Proposals and Estimates for FY2001 . . . . . . . . . . . . . . . . . . . . . 3

Table 2. Outlays for FY1999-2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Table 3. Receipts for FY1999-2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Table 4. Surpluses for FY1999-FY2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Table 5. Projected Cumulative On-Budget Surpluses;

FY2001-2005 and FY2001-2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Table 6. CBO’s Alternative Scenarios, Cumulative Surpluses;

FY2001-2005 and FY2001-2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

The Budget for Fiscal Year 2001

Presidents generally submit their budget proposals for the upcoming fiscal year

early in each calendar year. For FY2001, the Administration presented its budget on

February 7, 2000. The documents contained the Clinton Administration’s policy

proposals and expectations for the budget not only for FY2001, but for the following

five years, with some data available for 10 years. The documents also included

extensive budget and budget related information and data including estimates of the

budget without the proposed policy changes (current service baseline estimates),

historical budget data, detailed outlay and receipt data, selected analysis of specific

budget related topics, and the Administration’s economic forecast. The budget

documents are an annual basic reference source for federal budget information in

addition to their use as a transmitter of the Administration’s policy proposals.

The Administration’s submission is followed by congressional action on the

budget. This includes, in addition to hearings, the annual budget resolution,

appropriations, and, possibly, a reconciliation bill or bills. During the months of

deliberation on budget related legislation, the Administration often modifies its

proposals, not only because of interactions with Congress, but because of changing

circumstances in the economy and the world.

Budget Totals

Table 1 contains budget estimates for FY2001 from the Congressional Budget

Office (CBO), the Administration (the Office of Management and Budget – OMB),

and House and Senate budget documents. Differences in totals occur because of

differing underlying economic, technical, and budget-estimating assumptions and

techniques as well as differences in policy proposals. Most of the funding differences

associated with policy differences among proposals for the upcoming fiscal year are

often relatively small compared to the budget as a whole although these small

changes may have large implications over time. Budget totals should be expected to

change over time.

The Clinton Administration’s original budget proposal for FY2001 (February

2000) had a surplus of $184 billion. President Clinton proposed reducing total

spending below the current service baseline levels.1 Receipts would increase over

the FY2001 current services baseline levels.2 The budget proposed an on-budget

1

As measured from the Administration’s current services baseline estimates, outlays would

have fallen $3.8 billion or 0.2% of total baseline outlays.

2

Total receipts would have increased under the President’s proposals by $9.1 billion over

(continued...)

CRS-2

surplus of $9 billion in FY2001 and a cumulative $12 billion on-budget surplus over

the 5 years. The proposed cumulative on-budget surplus was $83 billion below the

estimated cumulative current services baseline on-budget surplus of $95 billion. The

President’s proposals for using the almost $83 billion surplus over 5 years divided

it among tax cuts, spending increases, and debt reduction.3

Congress’ FY2001 budget resolution (H.Con.Res. 290; H.Rept. 106-577; April

13, 2000) was based on the “freeze” baseline in CBO’s revised April budget

estimates. Using these underlying projections, the conference agreement on the

budget resolution had a $170 billion total surplus and a $9 billion on-budget surplus

for FY2002. The 5-year cumulative on-budget surplus in the budget resolution was

$356 billion below the CBO “freeze” cumulative baseline on-budget surplus The

resolution used $150 billion of this difference for tax reductions (split between two

reconciliation bills); much of the rest was to be used in higher spending compared to

baseline spending levels.

CBO’s reestimate of the Administration’s proposals for FY2001 (April 2000;

a preliminary report was released on March 9), differed little from the

Administration’s original numbers for FY2001. The reestimates put the

Administration surplus at $190 billion for FY2001. The differences between the

original Administration proposals and the CBO reestimates, given the size of the

amounts involved, remained relatively modest over the forecast.

Both OMB’s and CBO’s original and revised estimates showed receipts

remaining fairly stable and outlays falling as percentages of gross domestic product

(GDP) in FY2001. As shares of GDP, receipts rose towards levels last seen during

World War II while outlays continued a decline that began most recently in FY1992.

What to do with the non-Social Security portion of the surplus remained a focus

of the budget debate. An understanding developed in the previous year that the

Social Security surplus, essentially the off-budget surplus, would be used only for

reducing the debt held by the public.4 The House adopted two bills (H.R. 5173 and

H.R. 5203) in mid-September 2000 that contained essentially the same procedural

“lock-boxes” to reserve both the Social Security and Medicare surpluses for debt

reduction. The remaining part of the total surplus, the on-budget surplus, was the

focus of policy proposals and debates over increased spending, reduced taxes, and

additional debt reduction. Any increase in spending or reduction in taxes would

reduce the surplus compared to baseline levels.

2

(...continued)

the current services baseline levels in FY2001. Over the 5- and 10-year periods shown in

his budget, the proposals reduced receipts from baseline estimates.

3

The Administration proposed using part of the on-budget surplus in FY2001 and FY2002

for what it called “Medicare solvency transfers”. The proposed transfers would be $15

billion in FY2001 and $13 billion in FY2002. The result would have increased the

government debt holdings of the Medicare trust funds and reserve $28 billion for reduction

of federal debt held by the public.

4

The off-budget accounts consist of Social Security and the Postal Service; Social Security

makes up almost all of the amounts in the off-budget accounts.

CRS-3

Table 1. Budget Proposals and Estimates for FY2001

(in billions of dollars)

Actual for FY1997

Actual for FY1998

Actual for FY1999

Actual for FY2000

CBO “Inflated” baseline estimate for 1/26/00

CBO “Frozen” baseline estimate for 1/26/00

CBO “Capped” baseline estimate for 1/26/00

President’s budget for 2/7/00

President’s budget, current services est. for 2/7/00

CBO reestimates of President’s budget for 3/9/00

CBO “Inflated” rev. baseline estimate for 3/9/00

CBO “Frozen” rev. baseline estimate for 3/9/00

CBO “Capped” rev. baseline estimate for 3/9/00

House Budget Resolution for 3/24/00

Senate Budget Resolution for 4/7/00

Conference Budget Resolution for 4/13/00

President’s MSR for 6/26/00

CBO reestimates of the MSR 7/28/00

CBO “Inflated” Update baseline estimate for 7/18/00

CBO “Frozen” Update baseline estimate for 7/18/00

CBO “Capped” Update baseline estimate for 7/18/00

Clinton Administration Baseline 1/16/01

CBO Baseline 1/31/01

Bush Administration 2/28/01 & 4/9/01

House Budget Resolution (FY2002) 3/28/01

Senate Budget Resolution (FY2002) 4/6/01 b/

Conference Budget Resolution (FY2002) 5/10/01 b/

CBO Revised Baseline (FY2002) 5/2001

MSR (FY2002) 8/22/01

CBO Update (FY2002) 8/28/01

Actual Totals, 2/4/02

Revenues

Outlays

$1,579

1,722

1,828

2,025

2,016

2,016

2,016

2,019

2,010

2,026

2,016

2,016

2,016

2,006

2,003

2,005

2,096

2,119

2,109

2,109

2,109

2,125

2,135

2,137

2,129

2,134

2,135

2,115

2,013

2,011

1,991

$1,601

1,653

1,703

1,789

1,839

1,829

1,781

1,835

1,839

1,836

1,835

1,824

1,777

1,823

1,834

1,835

1,848

1,845

1,841

1,828

1,780

1,868

1,853

1,856

1,857

1,949

1,948

1,839

1,855

1,858

1,864

Deficit(-)/

Surplus

$-22

69

124

236

177

188

235

184

171

190

181

192

239

183

169

170

228 a/

254

268

281

329

256

281

281

272

186

186

275

158

153

127

Note: The three CBO baseline estimates from its 2000 budget reports represent three alternative paths

that discretionary spending might follow over the years covered by the estimates and projections. The

“Inflated” path increases discretionary spending by the rate of inflation. The “Frozen” path keeps

discretionary spending at its level in FY2000 throughout the period. The “Capped” path keeps

discretionary spending within the existing statutory discretionary spending caps through FY2002 when

they expire and allows it to grow at the rate of inflation thereafter.

a. The surplus reflects the $20 billion in unspecified revenue reductions or spending increases in the

Administration’s proposed “Reserve for America’s Future”. Without the reserved amounts the

surplus for FY2001 would be $248 billion.

b. FY2001 outlays contain $85 billion in surplus reductions as part of $100 billion “economic

stimulus” package spread over FY2001 and FY2002 as called for in the Senate passed budget

resolution and in the conference report on the budget resolution for FY2002 (see H.Rept. 10760).

MSR – OMB. Mid-Session Review

Update – CBO. Budget and Economic Outlook: An Update

CRS-4

The Clinton Administration revised some of its original proposals in its MidSession Review (MSR; June 2000). Both the size of the proposed tax cuts and

spending increases were modified. The Administration also proposed a “Reserve for

America’s Future” of unspecified future spending increases or tax cuts that would

grow from $20 billion in FY2001 to $27 billion in FY2005 before expanding to $85

billion in FY2010. The MSR also included proposed changes in budget accounting

that would move the Medicare Hospital Insurance (HI) trust fund off-budget where

it would join Social Security and the Postal Service. This accounting change would

drop the on-budget surplus reported in the MSR from $68 billion (including the

surplus of the Medicare Hospital Insurance trust fund) to $9 billion.5

The summer 2000 MSR (June 26, 2000) revealed continuing improvement in

the budget outlook. It showed a FY2001 surplus of $228 billion and a 5-year

cumulative surplus of $1,211 billion (the 5-year cumulative current service baseline

surplus – the surplus without the proposed policy changes – was $1,497 billion). The

MSR had an on-budget surplus of $9 billion in FY2001. If the Medicare surplus (offbudget in the MSR) is added back into the on-budget amounts (which makes them

comparable to the President’s original request, the congressional budget resolution,

and CBO baseline estimates and forecasts) the on-budget surplus jumps to $68

billion in FY2001.

The three revised baseline estimates in the CBO Update (July 2000) had total

surpluses ranging from $268 billion for the “inflated” baseline to $329 billion for the

“capped” baseline. The CBO on-budget surpluses (these include the Medicare HI

trust fund surpluses) ranged from $102 billion to $163 billion for FY2001.

These summer 2000 budget revisions from both OMB and CBO continued a

several year-long pattern of rising budget surplus estimates in each new budget

report. The better summer budget estimates and projections came from continuing,

steady economic growth and larger than expected receipts rather than any substantial

legislative changes.

Revised budget estimates for FY2001 were released in association with the

FY2002 budget estimates, proposals, and actions beginning early in 2001. For the

most part, these revised estimates showed continued improvement in the overall

budget outlook for FY2001. The January and February estimates from the

Administration and CBO budget documents contained a FY2001 surplus of $281

billion. Congress, in adopting the budget resolution for FY2002 (H.Con.Res. 83),

included reconciliation instructions for an 11-year tax cut that would increase outlays

(through an advance tax rebate) by not more than $100 billion over FYs 2001 and

2002 for “economic stimulus.” The FY2002 budget resolution put the FY2001

surplus at $186 billion. The tax cut legislation became law in June 2001 (P.L. 107-

5

The change has no effect on the total surplus. CBO stated in its An Analysis of the

President’s Mid-Session Review of the Budget for Fiscal Year 2001 (July 28, 2000),

“Placing the HI [Hospital Insurance] trust fund off-budget would ..., by itself, have no effect

on the economy or on the resources available to meet future needs. But if lawmakers chose

to adopt a goal of preserving off-budget surpluses for debt reduction, the proposed

accounting change... [might enhance] the prospects for long-term economic growth.” p. 4

CRS-5

16). Subsequent estimates from OMB and CBO measured the cost of the tax cut

wholly as reduction in receipts.

Uncertainty in Budget Projections

All budget estimates and projections are inherently uncertain. Their dependence

on assumptions that are themselves subject to substantial variation makes budget

estimates and projections susceptible to fairly rapid and dramatic changes.

One can get a sense of this uncertainty by comparing projections for FY2000

made 5 or more years ago with the actual results. The President’s budget for FY1996

came out early in 1995. CBO’s Budget and Economic Outlook for fiscal years 1996

through 2000 was also released early in 1995. The Administration projected, for

FY2000, a deficit of $194.4 billion; CBO projected a deficit of between $243 billion

and $284 billion.6 These 1995 projected deficits for FY2000 turned into a substantial

surplus of $236 billion. The $400 billion to $500 billion turnaround in the budget

balance outlook in five years may produce some wariness when contemplating policy

changes based on budget estimates that extend five to 10 years into the future.

CBO made this caution more explicit in its January 2000 report. In addition to

the three baselines, CBO provided an optimistic and a pessimistic scenario for each.

The optimistic one assumed that the current favorable economic and budgetary

conditions continue indefinitely into the future. The effect is to further boost receipts

and hold down spending. The pessimistic scenario assumed that the then existing

favorable conditions were temporary and that they would revert to the less favorable

conditions of the 1980s and early 1990s. These assumptions slow the growth of

receipts and force up federal spending. The results of these alternative forecasts were

dramatic. In the optimistic scenario, surpluses double over the 10 years. In the

pessimistic scenario, the expected surpluses turn into deficits by FY2003 in one of

the three baselines.

The pessimistic and optimistic scenarios are not more likely to occur than one

of the three baselines. But like the historical example above, they serve as a warning

when one considers how to resolve the surplus issue. Surpluses can be used to reduce

taxes, increase spending, or pay down the portion of the federal debt held by the

public. If the surpluses are reduced through additional spending commitments or

reduced taxes and these changes are combined with an economy that turns sour, the

government’s budget outlook deteriorates.

Budget projections are dependent on the underlying assumptions about the

direction of the economy and future policy. Any deviation from the expected

underlying assumptions such as faster or slower economic growth, higher or lower

inflation, or changes in assumed spending and tax policy, can have substantial effects

on the budget projections.

6

The smaller CBO deficit estimate assumed no growth in discretionary spending after

FY1998 and the larger number assumed discretionary spending growing with the rate of

inflation after FY1998.

CRS-6

Budget Action

The House Budget Committee approved its version of the FY2001 concurrent

resolution on the budget (H.Con.Res. 290; H.Rept. 106-530) on March 15, 2000.

The budget resolution is the congressional blueprint for subsequent budget action.

The resolution provided for tax cuts of $150 billion over 5 years (FY2001-FY2005)

and net spending increases compared to the CBO freeze baseline. Discretionary

spending would increase less than the rate of inflation. After extended negotiations

and the rejection of five alternative budget resolutions, the House passed the HBC’s

resolution, essentially unchanged, on March 24, 2000.

The Senate Budget Committee approved its version of the FY2001 budget

resolution on March 30, 2000 (S.Con.Res. 101; S.Rept. 106-251). The Senate

adopted the resolution with changes on April 7. The Senate version followed the

general pattern of the resolution adopted by the House, but included higher levels of

spending and differed in other aspects.

The conference committee on the budget resolution issued a report on April 12,

2000 (H.Rept. 106-577). The result modified both the House and Senate passed

versions of the budget resolution. It included reconciliation instructions for a 5-year

$150 billion tax cut (in two reconciliation bills) and up to $40 billion for Medicare

reform and a prescription drug benefit. The conference report cleared Congress late

on April 13, 2000.

In mid-summer (July 21, 2000), Congress cleared the first of two tax cut

reconciliation bills as called for in the budget resolution. It was a marriage penalty

relief bill, (H.R. 4810; H.Rept. 106-765; see CRS Report RL30420, Marriage Tax

Penalties: Legislative Proposals in the 106th Congress) and would have cut taxes an

estimated $14 billion in FY2001 and $84 billion over 5 years. President Clinton

vetoed the legislation on August 5, 2000. Congress cleared a non-reconciliation tax

cut bill (H.R. 8; H.Rept. 106-651; the Death Tax Elimination Act of 2000) on July

14. It would have reduced revenues by $8 million in FY2001 and by $28 billion over

the 5 years (and by $105 billion over the 10 years). The President vetoed this bill on

August 31.

The summer saw little progress on appropriations needed to fund discretionary

spending in FY2001. As the new fiscal year began, only two of 13 regular

appropriations had become law.7 The first of a series of continuing resolutions on

appropriations (CRs) was passed by Congress (H.J.Res. 109) and signed by the

President (P.L. 106-275; September 29, 2000) to fund activities not already covered

by an appropriation or by permanent funding. The struggle over appropriations, and

other legislation, continued through the fall, with Congress adopting several of the

regular appropriations but needing a series of CRs for the unfunded parts of the

government into mid-December. Congress and the President reached agreement on

7

Appropriations, mostly for discretionary spending, account for approximately a third of

total spending in the budget for FY2001. The remaining two-thirds the budget goes for

mandatory spending (Social Security, Medicare, etc.), almost all of which does not need

annual appropriations.

CRS-7

funding levels for the remaining four appropriations in mid-December. Congress

adopted H.R. 4577, the Consolidated Appropriations Act of 2001, on December 15

(signed into law by the President on December 21, 2000; P.L. 106-544), which also

included a modest tax cut ($31.5 billion over 10 years).8

In 2001, both President Bush and Congress proposed changes to the FY2001

budget in their respective budget proposals for FY2002. The Bush Administration

called for fairly modest changes to spending and revenues. The conference

agreement on the congressional budget resolution for FY2002 (H.Con.Res. 83) called

for $100 billion in advance tax rebates (a part of the tax cut adopted in late spring

2001; see below) over the fiscal years 2001 and 2002. The 11-year tax cut bill (P.L.

107-16; the Economic Growth and Tax Relief Reconciliation Act of 2001) cleared

Congress in late May 2001 and the President signed it in early June 2001. It included

a rate reduction tax credit in the form of checks mailed to taxpayers during FY2001

(see the CRS Report RS20939, The Rate Reduction Tax Credit (the “Tax Rebate”)

in P.L. 107-16, by Gregg Esenwein). The legislation was estimated to reduce the

surplus by approximately $74 billion in FY2001.

In early June 2001, the Administration sent Congress a request for $6.5 billion

in supplemental spending for the current fiscal year. Most of the additional money

was for the Department of Defense or defense-related activities. The House

responded with a supplemental appropriation bill (H.R. 2216) that somewhat

modified the original request, which it passed on June 20, 2001. The Senate

followed by passing a supplemental appropriations (S. 1077; July 10, 2001) that

differed both from the President’s request and the House- passed version. A

conference reported the legislation on July 19. The House and Senate passed the

legislation on July 20 and the President signed it into law on July 24, 2001 (P.L. 10720).

In response to the terror attacks on the United States on September 11, 2001,

Congress and the President agreed on a $40 billion emergency supplemental

appropriation (P.L. 107-38; September 18, 2001) for recovery and response.

Although it was a supplemental appropriation for FY2001, the lateness in the fiscal

year of its passage means that actual increase in outlays (that will reduce the surplus)

will occur in FY2002.

Outlays

The original FY2001 budget proposals from the Clinton Administration (in

January 2000) included relatively modest policy changes in outlays for FY2001,

whether measured against the FY2000 levels or against the current service baseline

estimates for FY2001. The changes would produce more substantial changes in

outlays over time. The congressional budget resolution also contained relatively

small policy changes to total outlays for FY2001 with larger effects from these

changes occurring in future years.

8

See, CRS Report RS20756, FY2001 Consolidated Appropriations Act: Reference Guide.

CRS-8

In President Clinton’s original budget, total outlays rose by $45 billion (2.5%)

between FY2000 and FY2001. They rose by $290 billion (15.8%) from FY2001 to

FY2005. CBO’s reestimates of these proposals put the FY2000 to FY2001 outlay

increase at $57 billion (3.2%) and the 5-year increase at $278 billion (15.1%). The

Clinton Administration’s Mid-Session Review (summer 2000) revisions barely

changed the FY2000 to FY2001 outlay increase in dollars or percent.

The congressional budget resolution (for FY2001) would have increased total

outlays by $51 billion (2.9%) from FY2000 to FY2001 (the resolution used CBO’s

FY2000 baseline outlay estimate, which differed slightly from OMB’s). It also had

total outlays rising by $250 billion (13.6%) during the FY2001 through FY2005

period.

The three baseline estimates in the CBO July 2000 Update showed outlays

growing between $16 billion (0.2%) and $65 billion (3.7%) from FY2000 and

FY2001. The Update baselines showed outlays growing between $155 billion (8.5%)

and $243 billion (13.2%) over the 5-year period. Revised outlay numbers in January

2001, increased outlays slightly for FY2001, reflecting the legislative changes

adopted during the fall of 2000.

The Bush Administration included only modest changes to FY2001 outlays, less

than $5 billion, within its original budget proposals for FY2002 (February 2001).

Congress, in adopting its budget resolution for FY2002 (H.Con.Res. 83), included

significant outlay changes for FY2001 in order to accommodate the reconciliation

instructions for a tax cut. The rate-reduction-tax-rebate part of the tax cut was

designed to use outlays in FY2001 and FY2002 to send checks to taxpayers. The

budget resolution showed it increasing outlays by $100 billion over the two years

(this cost has since been scored against receipts, reducing receipts by a net $70 billion

in FY2001).

The final official budget estimates for FY2001 from OMB and CBO were

contained in their mid-year reports for FY2002, released in late August 2001. These

showed total outlays for FY2001 of approximately $1,855 billion.

CRS-9

Table 2. Outlays for FY1999-2005

(in billions of dollars)

FY1999 a FY2000 FY2001 FY2002 FY2003 FY2004 FY2005

CBO “Inflated” baseline 1/26/00

$1,703.0 $1,769 $1,839 $1,888 $1,950 $2,017 $2,093

CBO “Frozen” baseline 1/26/00

1,769

1,829

1,864

1,905

1,951

2,006

CBO “Capped” baseline 1/26/00

1,769

1,781

1,802

1,856

1,918

1,985

President’s budget 2/7/00

1,790

1,835

1,895

1,963

2,041

2,126

President’s current services baseline 2/7/00

1,776

1,839

1,883

1,958

2,025

2,103

CBO’s reestimate of President’s budget 3/9/00

1,778

1,836

1,902

1,958

2,033

2,114

CBO rev. “Inflated” baseline 4/00

1,766

1,835

1,885

1,945

2,012

2,089

CBO rev. “Frozen” baseline 4/00

1,766

1,824

1,860

1,904

1,948

2,004

CBO rev. “Capped” baseline 4/00

1,766

1,777

1,799

1,853

1,915

1,982

House budget resolution 3/24/00

1,784

1,823

1,876

1,930

1,988

2,058

Senate budget resolution 4/7/00

1,780

1,834

1,890

1,951

2,015

2,088

Congressional budget resolution 4/13/00

1,784

1,835

1,889

1,947

2,010

2,085

President’s MSR 6/26/00

1,802

1,848

1,919

1,984

2,059

2,145

CBO reestimate of the MSR 7/28/00

1,788

1,845

1,924

1,979

2,057

2,140

CBO Update “Inflated” baseline 7/00

1,776

1,841

1,890

1,946

2,011

2,084

CBO Update “Frozen” baseline 7/00

1,776

1,828

1,859

1,849

1,933

1,983

CBO Update “Capped” baseline 7/00

1,776

1,780

1,797

1,844

1,902

1,964

Clinton Administration Baseline 1/16/01 b

1,789

1,868

1,933

1,994

2,057

2,145

CBO Baseline 1/31/01

—

1,853

1,923

1,984

2,056

2,137

Bush Administration Blueprint 2/28/01

—

1,856

1,959

2,012

2,071

2,164

House Budget Resolution (FY2002) 3/28/01

—

1,857

1,941

2,007

2,086

2,176

c/

Senate Budget Resolution (FY2002) 4/6/01

—

1,949

1,979

2,046

2,123

2,209

Conf. Budget Resolution (FY2002) 5/10/01 c/

—

1,948

1,952

2,021

2,103

2,196

CBO Revised Baseline (FY2002) 5/18/2001

—

1,839

1,922

1,985

2,054

2,133

MSR (FY2002) 8/22/01

—

1,855

1,962

2,025

2,111

2,208

MSR Baseline (FY2002) 8/22/01

—

1,855

1,949

2,011

2,084

2,172

CBO Update (FY2002) 8/28/01

—

1,858

1,958

2,024

2,106

2,194

a

Actual outlays for FY1999.

Actual outlays for FY2000.

c

FY2001 outlays contain $85 billion in surplus reductions as part of $100 billion “economic stimulus” package

spread over FY2001 and FY2002 as called for in the Senate passed budget resolution and in the conference

report on the budget resolution for FY2002 (see H.Rept. 107-60)

MSR– Mid-Session Review .

Update – The Budget and Economic Outlook: An Update. CBO.

b

Baseline Discretionary Outlays

Numerous assumptions can be used to produce baseline paths for discretionary

spending for FY2001. President Clinton’s (and later, President Bush’s) current

service baseline estimates incorporated, as most have in the past, the assumption of

an inflation adjustment for discretionary spending (in spite of the more restrictive

existing statutory discretionary spending caps that last through FY2002). CBO, in

its FY2001 estimates, used three different assumptions about discretionary spending

in producing their three baseline estimates. Congress used the CBO baseline that

assumed a freeze in discretionary spending when developing the congressional

budget resolution.

CRS-10

Changing the assumptions underlying the baselines ( the assumptions about the

future of discretionary spending in particular were prominent) can increase or

decrease the apparent effect of proposed policies when compared to the baselines.

For example, the President Clinton’s total discretionary spending proposals showed

little difference over the 5-year period from the current services baseline estimates,

a baseline that incorporated an inflation adjustment assumption for discretionary

spending. If instead, the baseline assumed that discretionary spending was frozen for

the 5 years (which is not a very realistic assumption), the President’s discretionary

proposals would have shown increases when compared to this alternative baseline.

Whatever the comparison with the current services baseline shows in the way

of proposed policy changes, all broad measures of federal spending, except net

interest, grow in the numbers of dollars spent from year-to-year throughout the

projection period. This was true for the President Clinton’s proposals as well as the

congressional budget resolution.

Receipts

The February 2000 Clinton Administration proposal requested gross tax relief

(including refundable tax credits) of $101.7 billion over 5 years (FY2001 through

FY2005). The budget also included a proposed $47.2 billion in net increases from

“eliminat[ing] unwarranted benefits and adopt[ing] other revenue measures.”

Combining the two produced an Administration-claimed net tax cut of $54.6 billion

for the FY2001 through FY2005 period. However, the budget included another

$44.2 billion in net receipt increases made up of both increases and decreases to

receipts that the Administration called “Other provisions that affect receipts.” The

major component of this increase was a proposed $31.2 billion increase in tobacco

related excise taxes and a levy on youth smoking. The overall net impact of the

proposed policy changes on receipts over the 5-year period was a $10.4 billion

reduction in receipts. The MSR in the summer of 2000, although making some

changes to these numbers, ended with a similar sized mix of increases and decreases

in receipts and a relatively small net tax reduction over the 5 years.

Over the 10-year period (FY2001 through FY2010), the Administration’s

original proposal called for a $351 billion gross tax cuts (including refundable tax

credits) and $96 billion in net increases for a net tax cut of $256 billion. The “Other

provisions that affect receipts” netted an $85 billion increase ($66 billion from

increased tobacco related receipts). The overall effect on receipts of the original

proposals was a $171 billion reduction for the ten period. The 10-year tax reduction

in the summer 2000 MSR was approximately $7 billion larger ($178 billion) than in

the original budget.

The budget resolution adopted by Congress included reconciliation instructions

for “two bills that reduce revenue by a total of $11.6 billion for FY2001 and $150

CRS-11

billion for the period for FY2001 through FY2005.”9 The bills, adopted by Congress,

were vetoed by the President.

Table 3. Receipts for FY1999-2005

(in billions of dollars)

FY1999

a

FY2000 FY2001 FY2002 FY2003 FY2004 FY2005

$1,827.5 $1,945 $2,016 $2,096 $2,177 $2,263 $2,361

CBO baseline 1/26/00 b

President’s budget 2/7/00

1,956 2,019 2,081 2,148 2,236 2,341

President’s current services 2/7/00

1,956 2,010 2,080 2,151 2,238 2,350

CBO’s reestimate of President’s Budget

1,946 2,026 2,097 2,171 2,262 2,352

3/9/00

House budget resolution 3/24/00

1,945 2,006 2,074 2,146 2,221 2,316

Senate budget resolution 4/7/00

1,944 2,003 2,072 2,147 2,226 2,319

Congressional budget resolution 4/13/00

1,945 2,005 2,073 2,146 2,223 2,317

President’s MSR 6/26/00

2,013 2,096 2,168 2,245 2,339 2,440

President’s MSR baseline 6/26/00

2,014 2,087 2,167 2,249 2,344 2,452

CBO reestimate of the MSR 7/28/00

2,008 2,119 2,203 2,285 2,379 2,477

CBO Update 7/18/00 b

2,008 2,109 2,202 2,290 2,380 2,486

Clinton Administration Baseline 1/16/01 c

2,025 2,125 2,210 2,301 2,401 2,525

CBO Baseline 1/31/01

—

2,135 2,236 2,343 2,453 2,570

Bush Administration Blueprint 2/28/01

— 2,137 2,190 2,258 2,339 2,436

House Budget Resolution (FY2002)

— 2,129 2,168 2,260 2,344 2,437

3/28/01

Senate Budget Resolution (FY2002) 4/6/01

— 2,134 2,177 2,284 2,380 2,474

Conf. Budget Resolution (FY2002) 5/10/01

— 2,135 2,171 2,267 2,369 2,473

CBO Revised Baseline (FY2002)

— 2,115 2,226 2,338 2,453 2,570

5/18/2001

MSR (FY2002) 8/22/01

— 2,013 2,135 2,220 2,328 2,463

MSR Baseline (FY2002) 8/22/01

— 2,013 2,135 2,221 2,333 2,476

CBO Update (FY2002) 8/28/01

— 2,011 2,134 2,196 2,307 2,438

a

Actual receipts for FY1999.

All three CBO baseline alternatives have the same receipt estimates and projections throughout the

period.

c

Actual receipts for FY2000.

MSR – Mid-Session Review

Update – Budget and economic Outlook: an Update

Note: The revenue estimates and projections did not change in the April 2000 revisions from CBO.

b

Combining the proposed changes to receipts and the normal growth experienced

by receipts, the Clinton Administration’s February 2000 budget showed receipts

increasing by $63 billion (3.2%) between FY2000 and FY2001. CBO’s April 2000

reestimates of the President’s proposals put the receipt increase at $80 billion (4.1%).

The congressional budget resolution had a year-over-year increase of $60 billion

(3.1%). The June 2000 MSR raised the increase to $83 billion (4.1%) from FY2000

to FY2001. The CBO July 2000 Update of baseline estimates showed a $101 billion

9

Conference Report on the Concurrent Resolution on the Budget for Fiscal Year 2001,

H.Rept. 106-577, page 66.

CRS-12

(5.0%) increase in receipts between FY2000 and FY2001. Much of these later

receipt increases resulted from changes in underlying factors and assumptions rather

than any proposed or adopted policy changes.

Revised receipt estimates for FY2001, in the first half of 2001 (in the FY2002

budget reports), showed receipts continuing to grow in response to expectations of

improving economic conditions. The estimates and proposals from OMB, CBO, and

the congressional budget resolution for FY2002, all showed increases in the

estimated size of receipts for FY2001. Even the tax cuts proposed by the

Administration (which, under its proposal, would not have begun until FY2002) and

as proposed in the conference report on the FY2002 congressional budget resolution

would not reduce FY2001 receipts.

The cost of the proposed advance tax rebates fell on outlays in the FY2002

budget resolution proposal for the 11-year tax cut. Subsequent measures of the effect

of the change produced after the adoption of the tax cut legislation (P.L. 107-16),

have shown this cost as a reduction in receipts. The August 2001 mid-year reports

from OMB and CBO estimated this receipt reduction to be between $35 billion and

$37 billion. Another $33 billion in FY2001 receipt reductions result from the

requirement in the tax legislation to shift the final corporate tax payment from the last

quarter of FY2001 to the first quarter of FY2002. The mid-year reports also reflected

the effect of the weakened economy and changes in technical aspects of the estimates

by reducing receipts between $34 billion (CBO) and $56 (OMB) billion from earlier

estimates. These estimates show total receipts actually falling from FY2000 to

FY2001.

Surpluses

Surpluses or deficits are the residuals left after Congress and the President

determine the level of federal spending and receipts. Reducing the deficit and

eventually reaching a balanced budget or generating and keeping a surplus (the

government had the first surplus in almost 30 years in FY1998) has been a major

focus of the budget debate for over a decade.

The Clinton Administration’s February 2000 budget proposed a surplus of $184

billion for FY2001 and projected growing surpluses for each of the following years

in the forecast. A surplus in FY2001 would be the fourth year in a row with a

surplus. CBO’s reestimate of the President’s proposals (April 2000) put the FY2001

surplus at $190 billion. The congressional budget resolution for FY2001 (April

2000) contained a $170 billion surplus for FY2001. The OMB MSR (June 2000)

raised the surplus to $228 billion for FY2001. CBO’s reestimate of the MSR’s

numbers (July 2000) put the FY2001 surplus at $254 billion. CBO’s baseline

estimates in its Update (July 2000) raised the FY2001 surplus to between $268

billion and $329 billion, depending on which of the three baselines was used. The

January 2001 baseline revisions put the FY2001 surplus at $256 billion (OMB) and

$281 billion (CBO). The Bush Administration’s budget included a surplus of $281

billion for FY2001.

CRS-13

Table 4. Surpluses for FY1999-FY2005

(in billions of dollars)

FY1999a FY2000FY2001FY2002FY2003FY2004FY2005

CBO “Inflated” baseline 1/26/00

$124

CBO “Frozen” baseline 1/26/00

CBO “Capped” baseline 1/26/00

President’s budget 2/7/00

President’s current services 2/7/00

CBO’s reestimate of President’s. Budget

3/9/00

CBO “Inflated” revised 4/00

CBO “Frozen” revised 4/00

CBO “Capped” revised 4/00

House budget resolution 3/24/00

Senate budget resolution 4/7/00

Congressional budget res. 4/13/00

President’s MSR 6/26/00

President’s MSR baseline 6/26/00

CBO reestimate of the MSR 7/28/00

CBO Update “Inflated” 7/18/00

CBO Update “Frozen” 7/18/00

CBO Update “Capped” 7/18/00

Clinton Administration Baseline 1/16/01 b

CBO Baseline 1/31/01

Bush Administration 2/28/01 & 4/9/01

House Budget Resolution (FY2002) 3/28/01

Senate Budget Resolution (FY2002) 4/6/01

Conf. Budget Resolution (FY2002) 5/10/01

CBO Revised Baseline (FY2002) 5/18/2001

MSR (FY2002) 8/22/01

MSR Baseline (FY2002) 8/22/01

CBO Update (FY2002) 8/28/01

a

b

$176

176

176

167

180

$177

188

235

184

171

$209

232

294

186

197

$227

271

321

185

193

$246

312

345

195

213

$268

355

376

215

247

168

190

196

213

228

238

179

179

179

161

164

161

211

224

221

232

232

232

236

—

—

—

—

—

—

—

—

—

181

192

239

183

169

170

228

239

254

268

281

329

256

281

281

272

186

186

275

158

158

153

212

237

297

198

182

184

224

279

254

312

344

405

277

313

231

227

198

219

304

173

187

176

231

273

324

215

196

198

236

295

280

345

397

446

307

359

246

253

238

247

353

195

210

172

250

315

348

231

211

212

255

324

296

369

447

478

343

397

268

259

257

266

400

217

250

201

273

358

379

257

231

232

268

360

309

402

503

522

380

433

273

261

265

277

437

254

304

244

Actual surplus for FY1999.

Actual surplus for FY2000

In the conference report on the FY2002 budget resolution (H.Con.Res. 83; May

3, 2001), the surplus for FY2001 began shrinking instead of growing. The

conference report reduced the expected surplus to $186 billion for the year because

of its proposals for a tax cut and higher spending. The 2001 mid-year budget reports

from OMB and CBO showed further drops in the estimated surplus for the year, with

OMB putting it at $158 billion and CBO estimating it to be $153 billion. The

combination of the tax cut, the weakening economy, and technical estimating

changes produced the ongoing surplus reductions. CBO’s September 2001 Monthly

Budget Review reduced the estimated surplus for FY2001 even further, to

approximately $121 billion for FY2001. The negative effect on the budget of

deteriorating economic conditions on receipts produced much of the decline in the

surplus.

CRS-14

What to do with the surplus remained one focus of the budget debates in 2000

as it had in 1999. Surpluses can be deliberately used up by increasing spending or

decreasing receipts. If unused, they would reduce the debt held by the public.10 The

Clinton Administration and the FY2001 congressional budget resolution included

combinations of spending increases, tax cuts, and debt reduction, although in

different amounts and with different mixes. The policy proposals would reduce the

surplus from baseline levels, reducing the amount of surplus available for reducing

federal debt held by the public.

An agreement that budget debate participants reached in 1999 was meant to

reserve surpluses from the Social Security accounts, essentially the off-budget

surplus, for debt reduction. This left the on-budget surplus as the focus of efforts to

adopt either spending increases or tax cuts or to do neither and use it for additional

debt reduction. (Reserving the off-budget surplus means that at least that part of the

surplus would be used to reduce the publicly held debt.) Any unused on-budget

surplus would contribute to debt reduction. To further limit the on-budget surplus

available for use (and to “protect” Medicare), the Administration in the June 2000

MSR proposed taking the Medicare Hospital Insurance trust fund off-budget. This

would have had the effect of dropping the FY2001 on-budget surplus from $69

billion to $9 billion. Table 5 shows estimates and projections of cumulative onbudget surpluses for FY2001- FY2005 and for FY2001-FY2010.

The President’s proposals and the congressional budget resolution both would

have reserved the bulk of the surplus, consisting of the off-budget portion of the

surplus (at least in the first 5 years), for reducing the debt. Most of the on-budget

surplus would be used for additional spending and tax cuts, with some left for

additional debt reduction. President Clinton’s budget indicated that, under its

proposals, federal debt held by the public could be eliminated by 2013 (the 2000

MSR moved this result to 2012). All of CBO’s baselines with their generally larger

surpluses than the Clinton Administration proposals would retire all the maturing

debt held by the public by at least FY2009 (some longer-term debt will not yet have

matured by then and will continue to be held by the public). The estimates in 2001,

with the much larger expected surpluses, showed the government retiring most of its

debt held by the public early in the second half of the decade.

10

Unless the surpluses are used for increased spending or decreased receipts (tax cuts) they

will be used by the Treasury, pretty much automatically, to reduce federal debt held by the

public. The Treasury can, and has, taken a more active role in retiring debt held by the

public by purchasing securities on the market and retiring some callable federal debt. The

Treasury could also hold the surplus cash and build up government cash balances, but this

would make little sense.

CRS-15

Table 5. Projected Cumulative On-Budget Surpluses;

FY2001-2005 and FY2001-2010

(in billions of dollars)

CBO “Inflated” baseline 1/26/00

CBO “Frozen” baseline 1/26/00

CBO “Capped” baseline 1/26/00

President’s budget 2/7/00

President’s current services 2/7/00

CBO’s reestimate of President’s Budget 3/9/00

CBO revised “Inflated” baseline 4/00

CBO revised “Frozen” baseline 4/00

CBO revised “Capped” baseline 4/00

House budget resolution 3/24/00

Senate budget resolution 4/7/00

Congressional budget resolution 4/13/00

President’s MSR 6/26/00

CBO reestimate of the MSR 7/28/00

President’s MSR 6/26/00 a

CBO reestimate of the MSR 7/28/00 a

President’s MSR baseline 6/26/00

President’s MSR baseline 6/26/00 a

CBO Update “Inflated” baseline 7/18/00

CBO Update “Frozen” baseline 7/18/00

CBO Update “Capped” baseline 7/18/00

Clinton Administration Baseline 1/16/01

CBO Baseline 1/31/01

Bush Administration 2/28/01 & 4/9/01

House Budget Resolution (FY2002) 3/28/01

Senate Budget Resolution (FY2002) 4/6/01

Conf. Budget Resolution (FY2002) 5/10/01

CBO Revised Baseline (FY2002) 5/18/2001

MSR (FY2002) 8/22/01

MSR Baseline (FY2002) 8/22/01

CBO Update (FY2002) 8/28/01

a

FY2001-FY2005

FY2001-FY2010

$148

379

594

41

95

90

171

396

610

93.3

12.1

39.8

27

172

254

395

360

539

695

969

1,179

549

846

317

333

207

257

829

32

145

-7

$837

1,859

1,919

350

745

423

893

1,891

1,948

—

—

—

49

407

594

863

1,470

1,873

2,173

3,349

3,387

2,066

2,688

782

713

643

743

2,707

418

948

555

Assumes Medicare remains on-budget.

Recent Surplus/Deficit History

The large deficits of the early 1990s dropped substantially and turned into

surpluses by the end of the 1990s. After climbing to over $200 billion in FY1990

through FY1994, with a peak of $290 billion in FY1992, the deficit fell to $107

billion in FY1996 and to $22 billion in FY1997. The government had a total surplus

of $69 billion in FY1998, its first in almost 30 years.

As a percentage of GDP, the deficit fell from its 1990s peak of 4.9% in FY1992

to 1.4% in FY1996 and 0.3% of GDP in FY1997. The surplus in FY1998 was 0.8%

CRS-16

of GDP and 1.4% of GDP in FY1999.11 CBO’s January 2001 baseline expected the

total surplus to reach 2.7% of GDP in FY2001. (The conference report on the budget

resolution for FY2002 would drop this to 1.8% of GDP.) The summer 2001 budget

reports have dropped this further, to an estimated 1.5% of GDP in CBO’s Update.

The actual surplus for the year was 1.3% of GDP.

A portion of the deficit reduction in the latter 1990s resulted from the many and

varied policy changes, in particular, the decreases in defense and net interest

spending that was adopted or occurred since the early 1990s. The constraints on nondiscretionary spending added to the deficit reductions. A substantial portion of the

changes resulted from steady, strong economic growth that resulted in substantially

higher revenues than forecast.

The surplus as currently defined is measured by the difference between total

federal receipts and total federal outlays. It represents the “extra” money the

government collects from the public over what the government spends on the public.

The Budget and the Economy

The budget and the economy affect each other. The relationship is an unequal

one, with the economy shoving and pushing around the budget with every economic

twinge while even relatively large changes in the budget, as measured by

policy-induced changes in the size of the deficit or surplus, may bounce off the

economy with little consequence. This imbalance became obvious in the second half

of 2001 as the continuing weakness in the economy persistently reduced the size of

subsequent surplus estimates. The Clinton Administration’s originally proposed

change in the government’s budget balance for FY2001 was very small when

measured against its current service baseline estimate. The economy, at over an

expected $10 trillion in 2001, is just too large to be measurably affected by the less

than $15 billion in originally proposed policy changes for FY2001.

Since a large part of the improvement in the budget situation since the early

1990s resulted from strong and sustained economic growth, one should remain aware

that what the economy gives (growing surpluses) it can also take away (which it

seems to have begun to do, at least in the short-term). A sustained recession or

slower than expected economic growth (which has happened) or a deterioration in

other economic variables may disrupt, at least for a time, the expectations of

continued budget improvement. CBO’s budget report, The Budget and economic

Outlook: Fiscal Years 2001-2010 (January 2000) in its chapter on The Uncertainties

of Budget Projections, states that, “...considerable uncertainty surrounds ...[budget]

projections for two reasons. First, the U.S. economy and the federal budget are

highly complex and are affected by many economic and technical factors that are

difficult to predict. Second, future legislation is likely to alter the paths of federal

spending and revenues. As a result, actual budgetary outcomes will almost certainly

differ from the Congressional Budget Office’s baseline projections.” (p.97).

11

The deficit reached 6.3% of GDP in FY1983, a post-World War II peak as a percentage

of GDP.

CRS-17

To further illustrate the power of changing the underlying assumptions (both

economic and budget) to change the budget outcome, CBO produces an optimistic

and pessimistic alternative scenario for its baseline projections (see Table 6). The

optimistic scenario assumes that the good economic and budget conditions of the last

few years continue indefinitely into the future. The pessimistic scenario assumes that

the recent favorable conditions have been an anomaly and the economy and the

budget revert to the conditions that prevailed in the 1980s and early 1990s. Under

the optimistic scenario, the surpluses accumulate over the 10-year period (FY20012010) to $7.672 trillion (based on revised CBO estimates from January 2001). Under

the pessimistic scenarios, the surpluses are much smaller, accumulating to $1.761

trillion over the10 years.

Table 6. CBO’s Alternative Scenarios, Cumulative Surpluses;

FY2001-2005 and FY2001-2010

(in billions of dollars)

FY2001-FY2005 FY2001-FY2010

CBO Optimistic Scenario 1/31/01

CBO Pessimistic Scenario 1/31/01

$2,440

1,025

$7,672

1,762

Source: CBO, The Budget and Economic Outlook: Fiscal Years 1992-2011, Jan. 2001.

Tables in the Clinton and Bush Administrations’ original budget documents for

FY2001 and FY2002 (February 2000 and April 2001) and in the CBO Budget and

Economic Outlook reports (January 2000 and January 2001) present the general effect

of economic changes on the budget. The tables contain estimates that show that

changes in economic growth produce the most significant effect on the budget.

Lower growth increases federal spending from those programs that respond to higher

joblessness and earlier retirements and the other events that follow an economic

downturn. Lower growth decreases federal receipts as those losing their jobs pay

lower taxes and business profits turn down, also resulting in lower tax receipts.

Other information in these tables indicates the effects of higher or lower

unemployment, higher or lower interest rates, and higher or lower inflation rates.