Survey of Current Business
March 2020
Volume 100, Number 3

NIPA Translation of the Fiscal Year 2021 Federal Budget

PDF

On February 10, 2020, the President submitted the Budget of the United States Government for Fiscal Year 2021 to Congress. This article presents estimates of federal government receipts and expenditures for fiscal years 2020 and 2021 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 interpreting 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 fiscal years 2020 and 2021, 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 −$1,067.6 billion for 2020 and −$1,051.0 billion for 2021. The budget surplus, defined as the difference between budget estimates of receipts and outlays, is −$1,083.4 billion for 2020 and −$966.1 billion for 2021 (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” at the end of this article.

The Budget projects increases in federal receipts of $242.2 billion in 2020 and $157.0 billion in 2021 (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 as well as social insurance and retirement receipts. The projected deceleration in federal receipts from 2019 to 2021 is driven by projected downturns in customs duties collections and deposits of earnings by the Federal Reserve System and by the repeal of several excise taxes that had been established by the 2010 Affordable Care Act.

The Budget projects increases in federal outlays of $341.4 billion in 2020 and $39.6 billion in 2021 (table 6). The largest contributors to these increases are outlays for medicare, social security, health, which includes funding for Medicaid, and national defense. The projected deceleration in federal outlays from 2019 to 2021 is driven by the pattern of outlays for education, training, employment, and social services, which includes outlays for federal direct student loans; income security, which includes outlays for Supplemental Nutrition Assistance Program (SNAP) benefits; health, which includes funding for Medicaid; and commerce and housing credit, which includes costs associated with the 2020 Census.3, 4

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 policies proposed in the budget that have not yet been enacted. The Budget also includes projected estimates of receipts and outlays that are consistent with the adjusted current services baseline. These estimates represent the expected deficit outlook in the absence of any policy changes and serve as the most appropriate benchmark against which to measure the effects of proposed policy changes. In the adjusted current services baseline, receipts are projected to increase $154.0 billion and outlays are projected to increase $83.8 billion in 2021 (table 7).

In this article, the term “proposed legislation” refers to any policies included in budget estimates that are not included in the adjusted current services baseline. If enacted, the net effect of proposed legislation on federal receipts and outlays would reduce the federal deficit for 2021 by $48.2 billion (table 7). Legislative proposals that would have the largest effect on the federal deficit in 2021 include the following:

  • A proposal to modernize welfare programs, including a reduction in outlays for SNAP benefits, would decrease the deficit by $20.3 billion. In NIPA estimates, outlays associated with this proposal are recorded primarily as social benefits (table 10, line 46).
  • A proposal to modernize Medicaid and the Children’s Health Insurance Program, including an expansion of work and community engagement requirements for Medicaid eligibility, would reduce the deficit by $8.3 billion. In NIPA estimates, outlays associated with these state-run programs are recorded primarily as grants-in-aid to state and local governments (table 10, line 58).
  • A proposal to eliminate wasteful Federal spending in Medicare would reduce the deficit by $8.1 billion. In NIPA estimates, outlays associated with this proposal are recorded primarily as social benefits (table 10, line 41).
  • A proposal to reform the U.S. Postal Service, including operational reforms and re-amortization of payments to the Retiree Health Benefits Fund, would reduce the deficit by $7.0 billion. In NIPA estimates, outlays associated with this proposal are recorded primarily as current surplus of government enterprises (table 10, line 29).
  • A proposal to reform student loans, including simplification of student loan repayment and elimination of the Public Service Loan Forgiveness Program, would reduce the deficit by $6.0 billion. In NIPA estimates, loans are treated as an exchange of financial assets and do not significantly affect estimates of current receipts or expenditures.

NIPA estimates of federal government current receipts that are consistent with the Budget increase by $273.8 billion in 2020 and $149.0 billion in 2021 (table 8 and chart 2). The deceleration in 2021 is due to a downturn in taxes on production and imports and decelerations in personal taxes and corporate taxes.

NIPA estimates of federal government current expenditures that are consistent with the Budget increase by $273.3 billion in 2020 and $132.5 billion in 2021 (table 9 and chart 3). The deceleration in 2021 is due to a downturn in nondefense consumption expenditures and decelerations in social benefits and grants-in-aid to state and local governments. The downturn in nondefense consumption expenditures reflects the effects of cuts to discretionary spending in 2021 as well as reductions in spending following the 2020 Census. The deceleration in social benefits reflects a deceleration in Medicare benefits and a downturn in SNAP benefits. The deceleration in grants-in-aid reflects downturns in funding for health and income security programs administered by state governments.

Seasonally adjusted quarterly NIPA estimates for 2020 and 2021 are displayed in table 10. These quarterly estimates are extrapolated from NIPA estimates currently published for the fourth quarter of 2019, which were released on February 27, 2020.5 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 pattern 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.

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 accurate, 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: (1) current tax receipts, (2) contributions for government social insurance, (3) income receipts on assets, (4) current transfer receipts, and (5) 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 U.S. Office of Management and Budget are used to allocate federal budget outlays into four major NIPA expenditures categories: (1) current transfer payments, (2) interest payments, (3) subsidies, and (4) 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 in the estimation of 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 data for compensation from the U.S. Office of Personnel Management and the U.S. 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. A more detailed accounting of the economic assumptions that underlie budget estimates is described in the “Economic Assumptions and Interactions with the Budget,” chapter of the Analytical Perspectives volume of the Budget.
  3. Items in italics correspond to budget functional classifications, as defined in the “Budget Concepts” chapter of the Analytical Perspectives volume of the Budget.
  4. Projected reductions in defense and nondefense discretionary spending in 2021 include the effects spending caps that were mandated by the Bipartisan Budget Act of 2019.
  5. 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 fiscal year budget data.