Survey of Current Business
May 2019
Volume 99, Number 5

NIPA Translation of the Fiscal Year 2020 Federal Budget

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On March 11, 2019, the President submitted the Budget of the United States Government for Fiscal Year 2020 to Congress. This article presents estimates of federal government receipts and expenditures for fiscal years 2019 and 2020 that are consistent with the projected receipts and outlays defined in the Budget but measured on a National Income and Product Account (NIPA) basis. These estimates are presented to assist readers in projecting what the effects of budgeted receipts and outlays would be on aggregate economic activity. They will also be used by the Bureau of Economic Analysis to inform estimates of federal government transactions for the coming year, including the federal government components of gross domestic product (GDP).

For both 2019 and 2020, estimates of federal government current receipts measured on a NIPA basis are greater than budget estimates of receipts, and estimates of federal government current expenditures measured on a NIPA basis are greater than budget estimates of outlays.1 Net federal government saving, defined as the difference between NIPA estimates of current receipts and current expenditures, is −$1,110.8 billion for 2019 and −$1,094.0 billion for 2020. The budget surplus, defined as the difference between budget estimates of receipts and outlays, is −$1,091.5 billion for 2019 and −$1,100.8 billion for 2020 (chart 1, table 1).

Chart 1. Federal Fiscal Position, line chart

[Click chart to expand]

The adjustments made to “translate” budget estimates into NIPA estimates are presented in table 2 and table 3. Differences between NIPA estimates and budget estimates of spending on national defense are shown in table 4. For more information about the conceptual differences between NIPA measures and budget measures of government transactions, see “NIPA Estimates of the Federal Sector and the Federal Budget Estimates.”

The Budget projects increases in federal receipts of $107.8 billion in 2019 and $207.1 billion in 2020 (table 5). These increases are largely the result of budget assumptions about economic activity and growth in real GDP over these years.2 Projected economic growth would result in an expansion of the personal income tax base and increased corporate profits that would increase individual and corporate tax revenues.

The Budget projects increases in federal outlays of $420.1 billion in 2019 and $216.4 billion in 2020 (table 6). The largest contributors to these increases are outlays for Medicare and social security benefits, national defense, and interest on the public debt. The projected deceleration in federal outlays from 2019 to 2020 is driven by outlays for higher education, including outlays for federal direct student loans, and income security, including outlays for food and nutrition assistance programs.

Proposed legislation

The budget projections discussed above include receipts and outlays that would result from the continuation of current policies as well as the effects of policy proposals that have not yet been enacted. The Budget also presents estimates of receipts and outlays that are consistent with the current services baseline. These estimates represent the expected deficit outlook and serve as the most appropriate benchmark against which to measure the effects of proposed policy changes. The Budget projects an increase in current services baseline outlays of $173.6 billion in 2020 (table 7). This projection includes cuts in defense and nondefense discretionary spending in 2020 that are the result of reductions in spending caps, or “sequestration,” that were mandated by the Budget Control Act of 2011.

In this article, the term “proposed legislation” refers to any policies that are included in budget estimates but are not included in current services baseline estimates. If enacted, the net effect of proposed legislation on federal receipts and outlays would increase the federal deficit for 2020 by $36.4 billion (table 7). The legislative proposals that would have the largest effect on the federal deficit in 2020 include the following:

  • A proposal to strengthen the military would increase defense spending by 5 percent from 2019 levels and would increase the deficit by $55.0 billion. In NIPA estimates, outlays associated with this proposal are recorded primarily as defense consumption expenditures and gross investment (table 10, lines 50 and 103).
  • A proposal to increase funding for the U.S. Department of Veterans Affairs Maintaining Internal Systems and Strengthening Integrated Outside Networks Act of 2018, including the establishment of a community care program, would increase the deficit by $8.0 billion. In NIPA estimates, outlays associated with this proposal are recorded primarily as nondefense consumption expenditures (table 10, line 51).
  • A proposal to reform welfare programs, including a reduction in outlays for Supplemental Nutrition Assistance Program benefits, would decrease the deficit by $22.1 billion. In NIPA estimates, outlays associated with this proposal are recorded primarily as social benefits (table 10, line 65).
  • A proposal to reform health care, including reforms and reductions to Medicare provider payments, would reduce the deficit by $6.0 billion. In NIPA estimates, outlays associated with this proposal are recorded primarily as social benefits (table 10, line 60).

NIPA estimates of federal government current receipts that are consistent with the Budget increase $92.3 billion in 2019 and $231.3 billion in 2020 (table 8 and chart 2). The acceleration in 2020 is primarily due to an acceleration in personal taxes and an upturn in corporate taxes.

NIPA estimates of federal government current expenditures that are consistent with the Budget increase $389.3 billion in 2019 and $214.4 billion in 2020 (table 9 and chart 3). The deceleration in 2020 is largely due to decelerations in defense and nondefense consumption expenditures, social benefits, and grants-in-aid to state and local governments. The deceleration in consumption expenditures includes most of the effects of sequestration cuts to discretionary spending in 2020. The deceleration in grants-in-aid is the result of downturns in federal funding for Medicaid and for education and income security programs administered by state governments.

Seasonally adjusted quarterly NIPA estimates for 2019 and 2020 are displayed in table 10. These quarterly estimates are extrapolated from NIPA estimates currently published for the first quarter of 2019, which were released on April 25, 2019.3 The quarterly patterns of these NIPA estimates are based on economic assumptions from the Budget and on expectations about the timing of receipts and expenditures related to specific government programs or policy proposals. For example, the quarterly patterns of estimates of some tax receipts are based on the administration’s projected pattern of wages, while cost-of-living increases for social security and certain other programs are incorporated into estimates of social benefits in the first quarter of each calendar year.4

Because these quarterly projections are based on budget estimates and assumptions, they should be viewed as approximations. Improvements will be made to these estimates as actual receipts and spending occur, as economic conditions change, as new laws are enacted, and as more source data become available. More reliable contemporaneous estimates will be published monthly in NIPA table 3.2 and in related underlying tables.

Budget estimates of government receipts are allocated into five major NIPA receipts categories: current tax receipts, contributions for government social insurance, income receipts on assets, current transfer receipts, and current surplus of government enterprises. These allocations are consistent with national accounting standards and are based on information and assumptions from the Budget and on projections of the effects of specific budget proposals from the U.S. Department of the Treasury Office of Tax Analysis.

Budget estimates of government outlays are organized by appropriation in the Budget Appendix. These data and supplemental data from the Office of Management and Budget are used to allocate federal budget outlays into four major NIPA expenditures categories: current transfer payments, interest payments, subsidies, and consumption expenditures and gross investment.

The allocation of budget receipts and outlays into NIPA categories will be used, along with supplemental administrative data, to inform how federal government receipts and spending reported by the U.S. Department of the Treasury are allocated into NIPA categories to produce monthly and quarterly NIPA estimates.

When quarterly NIPA estimates are published, estimates of defense consumption expenditures and gross investment will be reconciled with outlays reported in the Monthly Treasury Statement using financial, delivery, and other information from the U.S. Department of Defense. For nondefense expenditures, extrapolations of budget data will be used to estimate some categories of spending, including expenditures for durable goods, nondurable goods, services, and equipment for which no quarterly source data are available. Other categories of spending will incorporate quarterly source data, such as data for construction from the U.S. Census Bureau and for compensation from the U.S. Office of Personnel Management and the Bureau of Labor Statistics.

 


  1. For a historical perspective of the relationship between budget receipts and outlays and NIPA receipts and expenditures, see NIPA table 3.18B.
  2. For a more detailed accounting of the economic assumptions that underlie budget estimates, see chapter 2, “Economic Assumptions and Overview,” in the Analytical Perspectives volume of the Budget.
  3. Because quarterly NIPA estimates are extrapolated from published estimates, the average of the four fiscal year quarters may not equal the displayed fiscal year values, which are consistent with budget data.
  4. In previous years, this article displayed the estimated effect of annual pay raises for federal employees on the quarterly pattern of defense and nondefense consumption expenditures. Beginning with the 2018 comprehensive update of the NIPAs, the effects of annual pay raises are spread throughout the year and no longer have a notable impact on the pattern of these estimates. The effect of annual pay raises can still be observed in the quarterly pattern of defense and nondefense consumption expenditures before seasonal adjustment, as published in NIPA table 8.3.