2001 Ad

Survey of Current Business, March, 2000 by Laura M. Beall, Sean P. Keehan

THE FEDERAL Budget of the United States Government, Fiscal Year 2001 that was released by the President shows a $184.0 billion surplus, a $17.3 billion increase over the projected $166.7 billion surplus in fiscal year 2000.(1) The surplus in fiscal year 1999 was $124.4 billion. After adjustments that put these estimates on a consistent basis with the national income and product accounts (NIPA's), the current surplus would increase $16.5 billion, to $171.1 billion, in fiscal year 2001.

These Federal budget surplus estimates are derived from all Federal transactions--that is, all unified budget receipts and all unified budget outlays.(2) The fiscal year 2001 surplus reflects the administration's proposed legislation and program changes, the economic assumptions used in making the budget projections, and the laws that have already been enacted.(3)

This article summarizes the proposed legislation and program changes in the administration's budget and the budget estimates.(4) It then presents the budget receipts and outlays in the framework of the NIPA's, which are designed to show the composition of production and the distribution of the incomes earned in production. This framework, which differs in concept and timing from the budget, provides a means of gauging the effects of the Federal budget on aggregate measures of U.S. economic activity, such as gross domestic product, that are part of the NIPA's.

Proposed legislation and program changes

Receipts.--The fiscal year 2001 budget presents proposed legislation that would increase receipts by a net $9.1 billion (table 1). The largest proposals are an increase in the per pack tax on cigarettes that would add $4.1 billion to receipts and a transfer from the Federal Reserve to the U.S. Treasury that would add $3.8 billion.

Table 1.--Relation of Current-Services Estimates to the Budget

[Billions of dollars]

                                                    Fiscal year

                    Receipts                      2000      2001

Current-services estimates                     1,955.7   2,009.9

  Plus: Proposed legislation                        .6       9.1

    Tobacco tax                                     .4       4.1
    Maintain Federal Reserve surplus
      transfer to the U.S. Treasury                          3.8
    Limit benefits of corporate tax shelter        0         2.3
      transactions
    Reinstate Hazardous Substance Superfund
      excise taxes                                  .2        .7
    Convert airport trust fund taxes to user                  .7
      fee system
    Reinstate environmental tax imposed on
      corporate income                                        .7
    Repeal lower-of-cost-or-market inventory
      accounting method                                       .5
    Modify rules for life insurance policy                    .5
      acquisition costs
    Other                                           .2       2.6

      Subtotal: Provisions that increase            .8      16.0
        receipts

    Simplify the earned income tax credit                   -2.3
    Simplify tax law and modify alternative        -.2       -.9
      minimum tax
    Education incentives                           -.1       -.7
    International trade provisions                 0         -.5
    Charitable contributions by taxpayers
      who do not itemize                                     -.5
    Replace Harbor Maintenance Tax with                      -.5
      user fee
    Other                                          0        -1.4

      Subtotal: Provisions that decrease           -.2      -6.9
        receipts

  Equals: The budget                           1,956.3   2,019.0

                    Outlays

Current-services estimates                     1,776.2   1,838.8

  Plus: Program changes                           13.4      -3.7

    Commerce and housing credit                    0        -3.3
    National defense                               6.3      -3.1
    Education, training, employment, and            .1      -1.9
      social services
    Veterans benefits and services                 1.8      -1.5
    Allowances(1)                                   .8      -1.0
    Medicare                                       0         -.9
    Income security                                2.2       -.8
    Net interest                                    .3        .3
    General science, space, and technology         0          .3
    Administration of justice                      0          .5
    Health                                          .3        .7
    General government                              .1        .8
    International affairs                           .5       1.0
    Transportation                                 0         1.3
    Agriculture                                     .7       3.5
    Other                                           .3        .4

  Equals: The budget                           1,789.6   1,835.0

Current-services surplus or deficit (-)          179.5     171.2
Proposed changes, receipts less outlays          -12.8      12.8
Administration budget surplus or deficit (-)     166.7     184.0