109TH CONGRESS 2D SESSION
HOUSE OF REPRESENTATIVES
Report
ESTABLISHING THE CONGRESSIONAL BUDGET FOR THE UNITED STATES GOVERNMENT FOR FISCAL YEAR 2007 AND SETTING FORTH APPROPRIATE BUDGETARY LEVELS FOR FISCAL YEARS 2008 THROUGH 2011
[Graphic image not available]
MARCH 31, 2006- Committed to the Committee of the Whole House on the State of the Union and ordered to be printed
26-794
2006
109TH CONGRESS 2D SESSION
HOUSE OF REPRESENTATIVES
Report
ESTABLISHING THE CONGRESSIONAL BUDGET FOR THE UNITED STATES GOVERNMENT FOR FISCAL YEAR 2007 AND SETTING FORTH APPROPRIATE BUDGETARY LEVELS FOR FISCAL YEARS 2008 THROUGH 2011
[Graphic image not available]
MARCH 31, 2006- Committed to the Committee of the Whole House on the State of the Union and ordered to be printed
| COMMITTEE ON THE BUDGET | |
| JIM NUSSLE, Iowa, Chairman | |
| JIM RYUN, Kansas ANDER CRENSHAW, Florida ADAM H. PUTNAM, Florida ROGER F. WICKER, Mississippi KENNY C. HULSHOF, Missouri JO BONNER, Alabama SCOTT GARRETT, New Jersey J. GRESHAM BARRETT, South Carolina THADDEUS G. MCCOTTER, Michigan MARIO DIAZ-BALART, Florida JEB HENSARLING, Texas DANIEL E. LUNGREN, California PETE SESSIONS, Texas PAUL RYAN, Wisconsin MICHAEL K. SIMPSON, Idaho JEB BRADLEY, New Hampshire PATRICK T. MCHENRY, North Carolina CONNIE MACK, Florida K. MICHAEL CONAWAY, Texas CHRIS CHOCOLA, Indiana JOHN CAMPBELL, California |
JOHN M. SPRATT, JR., South Carolina, Ranking Minority Member DENNIS MOORE, Kansas RICHARD E. NEAL, Massachusetts ROSA L. DELAURO, Connecticut CHET EDWARDS, Texas HAROLD E. FORD, JR., Tennessee LOIS CAPPS, California BRIAN BAIRD, Washington JIM COOPER, Tennessee ARTUR DAVIS, Alabama WILLIAM J. JEFFERSON, Louisiana THOMAS H. ALLEN, Maine ED CASE, Hawaii CYNTHIA MCKINNEY, Georgia HENRY CUELLAR, Texas ALLYSON Y. SCHWARTZ, Pennsylvania RON KIND, Wisconsin |
| Professional Staff | |
| JAMES T. BATES, CHIEF OF STAFF | |
| THOMAS S. KAHN, MINORITY STAFF DIRECTOR AND CHIEF COUNSEL |
| C O N T E N T S | PAGE | |
| Introduction | 3 | |
| The Economy and Economic Assumptions | 10 | |
| Economic Projections: Administration, CBO, and Private Forecasters (Table 1) | ||
| 14 | ||
| Economic Assumptions of the Budget Resolution (Table 2) | ||
| 15 | ||
| Revenue | 17 | |
| Function-by-Function Presentation: | 050 National Defense | |
| 21 | ||
| 150 International Affairs | ||
| 23 | ||
| 250 General Science, Space and Technology | ||
| 25 | ||
| 270 Energy | ||
| 26 | ||
| 300 Natural Resources and Environment | ||
| 27 | ||
| 350 Agriculture | ||
| 29 | ||
| 370 Commerce and Housing Credit | ||
| 30 | ||
| 400 Transportation | ||
| 32 | ||
| 450 Community and Regional Development | ||
| 34 | ||
| 500 Education, Training, Employment and Social Services | ||
| 36 | ||
| 550 Health | ||
| 38 | ||
| 570 Medicare | ||
| 40 | ||
| 600 Income Security | ||
| 41 | ||
| 650 Social Security | ||
| 43 | ||
| 700 Veterans Benefits and Services | ||
| 45 | ||
| 750 Administration of Justice | ||
| 46 | ||
| 800 General Government | ||
| 47 | ||
| 900 Net Interest | ||
| 49 | ||
| 920 Allowances | ||
| 50 | ||
| 950 Undistributed Offsetting Receipts | ||
| 51 | ||
| Summary Tables: Revenue and Spending | 51 | |
| Comparison of Total Revenues for President's Request and Committee Recommendation (Table 3) | ||
| 53 | ||
| Comparison of On-Budget Revenues for President's Request and Committee Recommendation (Table 4) | ||
| 54 | ||
| Tax Expenditure Estimates by Budget Function, Fiscal Years 2006-2010 (Table 5) | ||
| 55 | ||
| Fiscal Year 2007 Budget Resolution Total Spending and Revenues (Table 6) | ||
| 62 | ||
| Fiscal Year 2007 Budget Resolution Discretionary Spending (Table 7) | ||
| 64 | ||
| Fiscal Year 2007 Budget Resolution Mandatory Spending (Table 8) | ||
| 66 | ||
| Fiscal Year 2007 Budget Resolution Minus the President's Request (Table 9) | ||
| 68 | ||
| Fiscal Year 2007 Budget Resolution Compared to 2006: Total Spending and Revenues (Table 10) | ||
| 70 | ||
| Fiscal Year 2007 Budget Resolution Compared to 2006: Total Spending and Revenues (Percentage Change) (Table 11) | ||
| 72 | ||
| Reconciliation | 75 | |
| Reconciliation Instructions to House Authorizing Committees (Table 12) | ||
| 77 | ||
| Section-by-Section Summary of the Budget Resolution | 79 | |
| The Congressional Budget Process | 87 | |
| Appropriations Committee | ||
| 87 | ||
| Authorizing Committees | ||
| 88 | ||
| Adjustments | ||
| 88 | ||
| Enforcement | ||
| 89 | ||
| Allocation of Spending Authority to House Appropriations Committee (Table 13) | ||
| 90 | ||
| Allocations of Spending Authority to House Committees Other Than Appropriations (Table 14) | ||
| 91 | ||
| Enforcing the Budget Resolution | 95 | |
| Votes of the Committee | 97 | |
| Public Debt | 121 | |
| Additional Report Language | 123 | |
| Other Matters To Be Discussed Under the Rules of the House | 129 | |
| Committee on the Budget Oversight Findings and Recommendations | ||
| 129 | ||
| New Budget Authority, Entitlement Authority, and Tax Expenditures | ||
| 129 | ||
| General Performance Goals and Objectives | ||
| 129 | ||
| Additional, Supplemental, Dissenting and Minority Views | ||
| 129 | ||
| Appendix--The Concurrent Resolution on the Budget | 135 | |
| List of Acronyms | ||
| Office of Management and Budget | OMB | |
| Congressional Budget Office | CBO | |
| Gross Domestic Product | GDP | |
| Budget Authority | BA | |
| T A B L E S | Page | |
| Table 1: Economic Projections: Administration, CBO, and Private Forecasters | 14 | |
| Table 2: Economic Assumptions of the Budget Resolution | 15 | |
| Table 3: Comparison of Total Revenues for President's Request and Committee Recommendation | 53 | |
| Table 4: Comparison of On-Budget Revenues for President's Request and Committee Recommendation | 54 | |
| Table 5: Tax Expenditure Estimates by Budget Function, Fiscal Years 2006-2010 | 55 | |
| Table 6: Fiscal Year 2007 Budget Resolution Total Spending and Revenues | 62 | |
| Table 7: Fiscal Year 2007 Budget Resolution Discretionary Spending | 64 | |
| Table 8: Fiscal Year 2007 Budget Resolution Mandatory Spending | 66 | |
| Table 9: Fiscal Year 2007 Budget Resolution Minus the President's Request | 68 | |
| Table 10: Fiscal Year 2007 Budget Resolution Compared to 2006: Total Spending and Revenues | 70 | |
| Table 11: Fiscal Year 2007 Budget Resolution Compared to 2006: Total Spending and Revenues (Percentage Change) | 72 | |
| Table 12: Reconciliation Instructions to House Authorizing Committees | 75 | |
| Table 13: Allocation of Spending Authority to House Appropriations Committee | 90 | |
| Table 14: Allocations of Spending Authority to House Committees Other Than Appropriations | 91 |
2d Session
109-402
--CONCURRENT RESOLUTION ON THE BUDGET--FISCAL YEAR 2007
[To accompany H. Con. Res. 376]
Strength, Spending Control, Reform
THE BUDGET RESOLUTION FOR FISCAL YEAR 2007
-
INTRODUCTION
The first 5 years of the 21st century have indeed altered the Nation's perspectives in significant ways--some by choice, some not.
The searing events of 9-11 continue to affect Americans' lives, from the stepped-up security measures visible everywhere, to the unspoken awareness that someone, somewhere, might be plotting another terrorist attack. Vigilance is a constant companion. There are also the challenges of U.S. military operations in Afghanistan and Iraq--an important and necessary part of the response to 9-11.
During the same period, the Nation has overcome an economic downturn; created a new cabinet department for homeland security; reformed education and expanded Medicare; enacted critical transportation and energy legislation; and tackled the worst natural disaster in the Nation's history.
This year, U.S. demographics have reached a turning point as well. The first of the baby boomers are turning 60 this year. Thus, the long-awaited retirement of this large generation--about 78 million of them--no longer lies somewhere in the hazy future; it is right and hand--and so are the massive burdens it will place on the government's entitlement programs.
To put it simply: the principal concerns of this country have changed in the past 5 years--and the changes are real, and permanent.
The fiscal plan reported by the Committee on the Budget acknowledges these changes, and answers them by focusing on three budgetary and governing priorities: strength, spending control, and reform.
RECENT DEVELOPMENTS
The events of 9-11 shocked an economy already weakened by a slowdown that started a year earlier. It also convinced Congress that answering terrorism took precedence over spending disciplines. This shift in priorities had bipartisan support: Congress would commit whatever was necessary to defeat terrorism.
These conditions drove up government spending and led to growing budget deficits; and the pressure of other priority reforms (education, Medicare, and so on) added to the burden.
But in time, Congress returned to budget discipline, with an emphasis on three premises: keeping the economy growing and creating jobs; controlling spending; and reducing the deficit. This approach has seen a degree of success.
First, the economy has achieved a healthy pace of growth that is sustainable for the long term.
- After adjusting for inflation, the economy has grown at a robust average of better than 3 percent per year since 2003.
- Nearly 5 million new jobs have been created since August 2003.
- February's unemployment rate was 4.8 percent--lower than the average rates of the 1970s, 1980s, and 1990s.
As always, the real credit for this growth goes to the American people--those who work and save and invest to make the economy grow. But Congress supported their efforts--by lowering tax burdens. This had the direct effect of increasing Americans' disposal income, trusting their ability to make the right decisions about how to use those resources--investing them in their families, or homes, or communities, or businesses.
Furthermore, due to this growth, tax revenue flowing into Washington has risen. Last year alone, revenue to the Federal Government increased by nearly 15 percent from initial estimates, even with the acceleration of the tax relief. At the same time, Congress reduced the growth rate of nonsecurity discretionary spending--to a near freeze last year. This followed the previous year's 1.3-percent growth, and was a marked improvement from the previous 5-year average growth of about 6.3 percent. The combination of higher revenue and restrained spending shrank the fiscal year 2005 deficit by about $200 billion, when compared with initial estimates.
When Hurricane Katrina struck, Congress promptly committed $62.3 billion in discretionary emergency supplemental funding to help the storm's victims. (Additional funds were provided subsequently, and more are expected.) But Congress also recognized--in keeping with its long-term plan to control spending--the need to offset at least some of this additional spending. Therefore Congress increased the amount of entitlement savings already proposed in the budget for fiscal year 2006, and applied an additional 1-percent reduction in the year's final appropriations bill. The latter applied across the board--except for the Department of Veterans Affairs and emergency spending--and saved an additional $8.5 billion in budget authority.
Still, as Katrina demonstrated, controlling the budget is not a one-stroke fix. It requires a long-term, step-by-step commitment--one that takes resolve, particularly when extraordinary circumstances make it difficult.
THE FISCAL YEAR 2007 BUDGET
This budget responds to the Nation's complex challenges with a set of priorities that are simple, straightforward, and proved by experience. In addition, these priorities work together and reinforce one another.
- Strength. This means maintaining the Nation's ability to protect itself from aggressors. This is the first obligation of any national government. But the underlying strength of America is its people--their creativity, their resilience, their energy, their productivity. All these translate into a prosperous economy--one that can reward work and ingenuity, and at the same time offer a compassionate safety net for those who need it. Supporting this prosperity is another critical element of this priority.
- Spending Control. Every dollar the government spends--whether financed by taxes or borrowing--is a dollar no longer available to promote the economy's growth. To some extent that is necessary, and over more than two centuries Americans have chosen--through their elected representatives--to commit substantial resources to government activities. But surely these commitments should be no greater than necessary; should cost no more than what is truly needed; and should never displace those things the economy can do better and more efficiently. Reasonable spending control is common sense--and also is another means of promoting growth and strength.
- Reform. Reform is really the link that joins strength and spending control. The typical habit in Washington is to assume that if a program is important, it should get more money--and the thinking stops there. The real truth is, if a program is worthwhile, it should be monitored and nurtured regularly. Congress should constantly strive to make its programs more effective and more efficient. That is reform.
Spending control drives this process of reform, and reform--when done diligently--strengthens the programs that are most important. In this way, all three of these priorities work together.
Here in summary is how these priorities translate into the parameters of the budget resolution:
Budget Summary--Fiscal Year 2007
(budget authority unless otherwise indicated)
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Total Spending $2.732 trillion
Total Discretionary Spending $929.534 billion
National Defense $510.170 billiona(an increase of 6.4 percent from 2006 excluding emergency spending) plus $50 billion for supplemental combat funding
Other Discretionary $419.634 billiona(a net increase of 0.7 percent from 2006, excluding emergency spending)
Mandatory Spending (excluding net interest) $1,555.440 billion (an increase of 3.7 percent from 2006 excluding emergency spending) (assumes various mandatory spending reforms with a total budget impact of -$6.753 billion in outlays over 5 years)
Revenue $2.422 trillion (assumes total tax relief of $228 billion over 5 years, consisting of extensions of 2001, 2003, and other expiring tax relief, as well as new House-passed tax initiatives such as pension reform)
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STRENGTH
THE ECONOMY
Both private and government forecasters estimate that the economy has reached a condition of sustainable, long-term growth, with continuing job creation and relatively low inflation and interest rates. These estimates, however, assume no tax increases--and so does this budget.
Because of arcane congressional bookkeeping procedures, when Congress extends a tax provision that is scheduled to expire, it is counted as a new tax cut, and a reduction in revenue--even though the provision simply retains existing law. This counterintuitive mechanism affects the majority of revenue assumptions in the budget resolution.
- First, the resolution assumes extension of the 2001 and 2003 tax relief provisions that which would otherwise expire during the budget window. This choice will be reflected as a sizeable reduction in revenue--even though, again, it is simply a matter of continuing tax provisions now in effect.
- The resolution assumes extension of other expiring of tax provisions, including relief from the alternative minimum tax [AMT].
All these provisions are further discussed in the revenue section of this report.
NATIONAL SECURITY
Protecting the Nation from potential aggressors is a pre-eminent responsibility of any national government. This budget meets that challenge. The resolution accommodates the President's request for a 7-percent increase for the Department of Defense (not including war funding). It also includes a contingency fund of $50 billion toward supplemental war funding. In addition, the budget allows for the President's 3.8-percent increase for homeland security funding.
But even as the budget provides for these ample resources, the administration must understand that the Pentagon is not immune from the benefits of reform and oversight. Indeed, no where are these more important than in safeguarding the Nation's security. Congress should strive to assure that every dollar spent on defense and homeland security truly contribute to making Americans safer.
CONTROLLING SPENDING
DISCRETIONARY SPENDING
The resolution provides a total of $873 billion in fiscal year 2007 for annually appropriated spending categories, excluding emergency spending proposals. These funds will be subdivided by the Appropriations Committee among the various programs under its jurisdiction.
As noted, this level accommodates the President's requested increases for defense and homeland security. Assuming this, other discretionary spending activities would be held flat, as recommended by the President. Within the overall level, some activities might be increased and others reduced.
Because all these decisions lie with the Appropriations Committee, a further explanation of the nature of these programs may be helpful.
Every discretionary spending category has unique characteristics, defying simple comparisons among them. For example, national defense often is viewed as a kind of stand-alone activity by those who, correctly, view it as a pre-eminent obligation of the Federal Government. But several other spending categories are also intrinsically Federal--such as international affairs, or veterans benefits--even though their spending totals are much smaller than defense.
On the other hand, various other priorities have evolved from their own sets of circumstances, so that their importance cannot be measured by Federal dollar amounts alone. It is widely agreed, for instance, that education is one of the Nation's highest priorities. Yet the Federal Government provides only about 7 percent of the K-12 education funding that gets spent nationally--the rest comes from States and localities. Similarly, the Federal Government's share of energy or discretionary health care spending might seem relatively small compared with the importance of these activities nationally; but that is mainly due to the significant nongovernment role in these areas. In none of these cases does the Federal funding level suggest that these activities are less important to the Nation. It is simply a product of how these priorities have developed over time--including how much State and local or nongovernment support they receive.
Some also contend that, with regard to controlling overall Federal spending, discretionary accounts are smaller in total and far less problematic than mandatory entitlement spending (discussed below). This may be true, but it ignores two critical points. First, controlling the budget means controlling all spending. Second, all government programs--mandatory or discretionary--can benefit from oversight and reform; and as noted above, these are driven by spending control. Discretionary programs are not immune.
GENERAL MANDATORY SPENDING
The Federal Government's entitlement programs are well-intended, and provide valued assistance to millions of Americans. But their costs are becoming unmanageable.
Currently, entitlement spending is growing at about 6 percent per year--faster than the economy, faster than inflation, faster than normal long-term revenue growth, and far beyond the government's (or the economy's) means of sustaining it. To put this another way: if the Federal budget were balanced today, the spending growth of these entitlements would drive it back into deficit a year from now; and this is not counting the full baby-boom retirements.
Not surprisingly, entitlement spending also is consuming increasing shares of the overall budget. In 1995, entitlements (excluding interest) consumed 48.7 percent of total Federal spending. By 2005, they had reached 53.4 percent. By 2016--if left unreformed--they will take up more about 64 percent of the budget.
These rates of growth--in programs that tend to run on automatic pilot, without regular oversight or reform--are crowding out funding for other priorities, such as education, veterans' health care, environmental protection, housing, and many others. As a result, they are crippling Congress's ability to adapt to changing demands and priorities--making it all but impossible to budget in any meaningful way.
Clearly, this spending growth must be controlled. But the process does not, and should not, entail merely `cutting' programs or resources. Rather, it demands reform. So Congress last year resumed the practice of reform with the Deficit Reduction Act [DRA] of 2005 (the first time since the Balanced Budget Act of 1997 that entitlements had been addressed comprehensively). The measure included reforms that provided fairer cost-sharing among Medicaid beneficiaries and limited the ability of wealthy persons to qualify for Medicaid nursing home coverage; improved the targeting of assistance under programs such as foster care and Supplemental Security Income; and reduced lender subsidies in the government's student loan programs. Because of these and other reforms, the bill also will save taxpayers almost $40 billion over the next 5 years.
REFORM
But--to repeat an earlier point--reform cannot and should not be a merely occasional practice. It must be ongoing. Government programs require consistent and regular nurturing by Congress to assure they are up to date, efficient, and effective. This is why oversight and reform must go hand-in-hand with budgeting.
ENTITLEMENT REFORM
Even small steps in reform can be valuable. So this budget follows on the Deficit Reduction Act with modest goals--reforms that will yield about $6.75 billion in savings over 5 years.
But it is the quality of reforms that truly matter; and among the ways to describe those implied by this budget are the following:
- Eliminating Unnecessary Corporate Subsidies. Apart from direct subsidies, the government sometimes provides various breaks or loopholes that amount to the same thing. These subsidies violate the very market principles that have made the U.S. economy strong. Many of them can and should be reduced or eliminated.
- Eliminating Fraud and Overpayments. As noted earlier, the Federal Government's public assistance programs are well-intended and provide much-needed help to many Americans. But many of them are also subject to fraud, abuse, and overpayments. The persistence of these problems is unfair to those who seek assistance honestly, and an excessive burden to taxpayers as well. These problems can be corrected only through constant oversight and reform.
- Strengthening the Nation's Pension System. When people retire, they should feel secure about the pension benefits they have been promised. Companies often do not fully fund their pension plans, intensifying the strain on the already cash-strapped Pension Benefit Guaranty Corporation [PBGC]--the Federal agency charged with insuring those same plans should they be terminated. The government should provide an incentive for these companies to fully fund their pension plans. So this budget incorporates House-passed legislation requiring companies to act more responsibly, by fully funding their plans. This will help reduce pension-plan under-funding, reinforce workers' pension benefits, and limit the risk to taxpayers of a massive PBGC bailout.
- Restoring Market Forces. The U.S. economy is strong because market forces are allowed to work freely. But the government sometimes misses opportunities to apply these forces. It only makes sense to employ market thinking--wherever reasonable and possible--to the activities of the Federal Government.
EMERGENCY SUPPLEMENTAL SPENDING
No one could have anticipated the scale of Hurricane Katrina's devastation, or the massive costs of recovery. But every year brings unforeseen events--whether they are floods, earthquakes, hurricanes, forest fires, or even military operations overseas. The emergency mechanism in the budget process--which exempts this spending from the usual budget disciplines--is designed to accommodate this reality. But even if the specific events are unforeseen, the fact that some emergency will arise is almost routine. Indeed, Congress has made use of supplementals as far back as 1790, and has provided emergency supplemental spending of some amount in every year since the emergency concept was formally introduced in 1990.
As is well known, the amount of emergency funding--outside the budget--has increased sharply in recent years, principally due to the war and Katrina. It has mushroomed from $16.9 billion in 2000 (about 2.9 percent of total discretionary spending) to $160.4 billion in 2005 (19.5 percent of appropriated funds). Even if the additional spending is justified, the continued practice of adding on and increasing these amounts outside the regular budget is not.
That is why this budget includes $4.4 billion in budget authority to anticipate potential natural disasters. The $4.4 billion--in an emergency reserve fund for fiscal year 2007--is the median of emergency spending during the past 10 years for accounts typically associated with spending in response to natural disasters. But this is just a start--and more can be done.
This year, the Budget Committee will begin to reform the budget process itself, to better anticipate actual spending--including what is currently spent outside the normal budget process. It will establish two reserve funds: one for natural disasters and another for the war on terrorism. The Budget Committee will vote to increase the limits in the budget resolution when any spending measure exceeds the reserve for natural disasters.
CONCLUSION
As mentioned at the outset, the principal concerns of this country have changed since 2001. Some of the changes were by choice, some not--and some have been expected for decades. As a result, Congress has a choice: Members can delude themselves the customary ways of thinking and approaching these problems--by mechanically spending and taxing more--will still work. Or Congress can pretend the problems will go away.
Or, Members can embrace the new challenges at hand, and start the process of addressing them. This budget answers by trusting strength, spending control, and a commitment to ongoing reform. That is the plan embraced by this budget.
THE ECONOMY AND ECONOMIC ASSUMPTIONS
STRONG GROWTH IN JOBS AND THE ECONOMY CONTINUE
- The economy turned in a solid performance in 2005, despite further sharp increases in energy prices and devastation caused by hurricanes.
--Growth in the inflation-adjusted (real) gross domestic product [GDP] is estimated to have been 3.5% in 2005, even though growth slowed substantially in the fourth quarter as a result of hurricane-related disruptions and other factors that are likely to prove transitory.
--Close to two million new payroll jobs were created last year. The economy has seen 30 consecutive months of job gains, adding close to 5 million new jobs to payrolls.
--The housing market continued to be vibrant throughout last year, with some signs of cooling late in the year from the rapid pace of expansion observed over the past few years. Robust gains in real estate values in the past few years, combined with rises in stock prices since 2002, have encouraged consumer spending and helped keep economic activity moving forward in 2005.
--Inflation and inflation-expectations remained relatively well-contained, and at historically low rates, throughout 2005 according to the Federal Reserve.
--Robust growth in the economy and continued low, but slowly rising, inflation encouraged the Federal Reserve to tighten monetary policy by continuing to lift short-term interest rates throughout the year in 2005.
--Despite those rate increases, long-term interest rates remain low by historical standards. Thus, credit conditions remained supportive for businesses last year, facilitating a rapid expansion of business investment spending.
--The major factors that contributed to the strong performance of the U.S. economy in 2005 remain in place, including the pro-growth tax policies enacted under the current administration.
- Looking forward, public and private forecasters expect the economy to continue in a sustained expansion, with solid real growth, ongoing payroll jobs gains, and continued low unemployment and inflation.
- In international perspective, the performance of the U.S. economy has been particularly impressive, adding more jobs in the past two-and-a-half years than Japan and the European Union combined. Growth in GDP in the U.S. has outpaced every other major industrial country since 2001.
- Over the past 4 years, we've seen remarkable changes in our Nation's economic picture and no one should underestimate the challenges we've had to overcome. Our Nation and our economy have had to endure the bursting of the stock market bubble; corporate scandals; a recession; the terrorist attacks and their aftermath; the uncertainties of an international war against terrorism, including conflicts in Afghanistan and Iraq; energy price shocks; and devastation from hurricanes.
- The resilience of the U.S. economy in the face of these major shocks are a testament to the fundamental strength and flexibility of the U.S. economy and the efforts and determination of American workers.
- In addition, fiscal and monetary policies combined to play major roles in keeping the adverse effects of the 2000-01 slowdown and recession milder than otherwise would have been the case. Pro-growth tax policies helped boost the economy in its recovery from the recession and continue to sustain the current economic expansion.
- Fiscal policy actions have been particularly aggressive in working to assist those devastated by the hurricanes last year and to provide more general tax relief. Tax relief set in place in 2001 helped boost the economy quickly out of its mild recession; relief in 2003 helped move tax rates toward those more conducive to economic growth. Three major tax relief bills became law over 2001-03:
--The Economic Growth and Tax Relief Reconciliation Act of 2001 (June 2001) provided for immediate and phased-in reductions in income taxes and tax rates, as well as other incentives and tax relief measures.
--The Job Creation and Worker Assistance Act of 2002 (March 2002)--in addition to providing extended unemployment benefits and special tax relief following September 11--provided tax relief that included business investment tax incentives from `bonus depreciation' of equipment and software.
--The Jobs and Growth Tax Relief Reconciliation Act of 2003 [JGTRRA] (May 2003) accelerated the scheduled income tax relief and tax rate reductions of the 2001 legislation, increased the `bonus depreciation' business investment tax incentives, and reduced dividend and capital gains tax rates.
- Since enactment of the pro-growth tax relief provided by JGTRRA:
--GDP growth has averaged 3.8 percent.
--Growth in business fixed investment has averaged 8.5 percent.
--Growth in business investment in equipment and software has averaged 10.9 percent.
--The Dow Jones Industrial Average stock index has increased 29 percent and the NASDAQ stock index has increased 48 percent.
--Monthly payroll job gains have averaged 150,000.
--Capital gains realizations have roughly doubled and taxes paid on those gains have risen by about 60 percent.
--The number of Standard and Poor's companies paying dividends increased, reversing a 25 year decline.
- Monetary policy also played an important role in bolstering the economy. From January
2001 through June 2003, the Federal Reserve [Fed] reduced its target for overnight interest rates from 6.5 percent to 1 percent in 13 separate cuts. Lower interest rates helped to boost interest-sensitive spending, including consumer durable goods, business equipment investment, and residential housing construction. As the economy emerged from the mild recession of 2001 and began to display sustained traction and robust growth, the Federal Reserve acted to remove its low-interest-rate policy that was designed to accommodate strengthening economic growth. Since its policy meeting in June 2004, the Fed has raised its target overnight interest rate from the historic low of 1 percent to the current 4.75 in a sequence of 15 quarter-point increases.
- As a testimony to the durability of the current economic expansion, real GDP growth has averaged 3.3 percent since the Fed began removing its policy accommodation and payroll job gains have totaled close to 3.4 million new jobs.
THE CURRENT ECONOMIC SITUATION
- Incoming data support the view that the U.S. economy is in a sustained economic expansion with continued job gains, robust real growth in output of goods and services, and low unemployment and inflation.
- The list of `Good News' confirming the economy's solid performance is impressive, including:
--Gross Domestic Product: The inflation-adjusted (real) gross domestic product [GDP] grew at over 3.5 percent last year. Real GDP has grown for 17 consecutive quarters, with average annualized growth of 3.1 percent.
--Employment: Payroll employment rose by 243,000 jobs in February and an average of 228,000 over the past four months. There have been 30 consecutive months of payroll job gains, adding close to 5 million new jobs to the Nation's payrolls. 2.3 million new payroll jobs have been added over the past year.
--Unemployment Rate: The unemployment rate inched up to 4.8 percent in February, from a 4 1/2 year low of 4.7 percent in January, remaining well below the average in each of the past three decades. The unemployment rate has fallen from 6.3 percent in June 2003 to the current 4.8 percent, a decline of 1.5 percent in the jobless rate.
--Productivity: Non-farm labor productivity (output per hour of labor) has risen at an average annual rate of 3.3 percent since 2001, faster than any five-year period in the 1970s, 1980s or 1990s. Productivity growth is a key driver of increases in wages and living standards in the long run.
--Manufacturing: The manufacturing sector of the economy has been expanding for 33 consecutive months, according to the Institute for Supply Management [ISM] manufacturing index.
--Services: The services sector of the economy has been expanding for 35 consecutive months, according to the ISM non-manufacturing (services) index. The services sector accounts for a majority of the Nation's output.
--Business Investment: From its trough in the first quarter of 2003, business investment spending has increased by 25 percent, a sign of renewed business confidence. Business investment in equipment and software has risen by 32 percent since the first quarter of 2003.
--Household Net Worth: The total net worth of households and non-profit organizations rose 2.7 percent in the third quarter to a record high of $51.1 trillion, surpassing the previous record established in the second quarter. Household net worth has risen for 12 consecutive quarters. Wealth has risen not just because of housing. Deposits--checking accounts, savings accounts and so on--are at a record high and are larger as a share of disposable (after-tax) income than at any time since 1993.
THE ROLE OF BUDGET RESOLUTION POLICIES
- One of the guiding principles of this budget's policies is that our nation's economy must continue to grow and to create jobs to serve as a solid foundation for reducing the budget deficit. Economic growth alone may not be able to eliminate the deficit--but without solid economic growth, efforts to reduce budget deficits will be futile.
- One of the fundamental ways that this budget encourages economic growth is by supporting the policies that have been working to enhance incentives for continued job creation, investment by businesses in plant and equipment, and increased disposable (after-tax) income for consumers. We will continue to maintain the tax relief we passed and keep the tax burden from rising.
- A warning of negative consequences of not continuing with pro-growth tax policies can be found in recent projections from the non-partisan Congressional Budget Office [CBO]. CBO forecasts that economic growth will slow in the long run (i.e., beyond 2011) if recently enacted tax relief is allowed to expire, as scheduled under current law. In fact, one important factor that CBO highlighted as contributing to the forecasted slowdown was that the scheduled expiration of various tax provisions in 2011 will `* * * discourage work by increasing marginal tax rates.'
- In addition to maintaining a pro-growth stance with tax policy, it is of critical importance to control Federal spending. All spending must be paid for, either through taxes or borrowing--and both are burdens on the economy. And for that simple reason alone, controlling spending is itself a policy for sustaining stronger economic growth.
- Reinforcing this view, former Federal Reserve Chairman Greenspan recently stated that: `Addressing the government's own imbalances will require scrutiny of both spending and taxes. However, tax increases of sufficient dimension to deal with our looming fiscal problems arguably pose significant risks to economic growth and the revenue base. The exact magnitude of such risks is very difficult to estimate, but, in my judgment, they are sufficiently worrisome to warrant aiming, if at all possible, to close the fiscal gap primarily, if not wholly, from the outlay side.'
- The underlying policies of the budget resolution--including sustained tax relief, restrained spending growth, declining deficits, and a stable or falling debt-to-GDP ratio--represent a favorable set of policies for the performance of the economy.
THE ECONOMIC OUTLOOK
- An outlook for continued solid growth in the economy over a 2006-11 projection period for the budget resolution is shared in the economic projections from the administration, CBO, and the consensus of private forecasters compiled by Blue Chip Economic Indicators (see Table 1).
--The various forecasts project real GDP growth in 2006 in the range of 3.4 percent to 3.6 percent: 3.3 percent for the Blue Chip consensus; 3.4 percent for the administration; and 3.6 percent for CBO.
--Relatively strong growth is expected for the entire forecast horizon 2006-11, with the administration and the Blue Chip consensus projecting real GDP growth to average about 3.2 percent per year, and CBO slightly higher at 3.3 percent.
--Reflecting continued expansion in jobs that accompanies continued economic growth and some expected slowdown in labor force growth as the baby boom generation retires, the unemployment rate is projected to continue throughout the projection period in the 4.9 to 5.1 percent range--low by historical standards.
--Inflation is expected to moderate with projected easing of energy prices after 2006. Consumer price inflation, for example, is expected to ease from close to 3.0 percent during 2006 to between 2.0 and 2.5 percent for the remainder of the projection period.
--Short-term interest rates (i.e., 3-month Treasury bill rates) are expected to settle at close to 4.5 percent over the projection period while longer-term rates are expected to edge up, but remain low by historical standards. The 10-year Treasury note yield is projected to rise from around 5.0 percent in 2006 to somewhere between 5.2 percent and 5.4 percent, depending on the forecaster.
- CBO's annual economic assumptions were adopted for use in the budget resolution and are shown in Table 2.
TABLE 1- ECONOMIC PROJECTIONS: ADMINISTRATION, CBO, AND PRIVATE FORECASTERS
[Calendar years]
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2006 2007 2008 2009 2010 2011 Projected annual average
2006-2011
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Real GDP (percent change, year over year):
Administration 3.4 3.3 3.3 3.1 3.1 3.1 3.2
CBO 3.6 3.4 3.4 3.3 3.0 2.8 3.3
Blue Chip, March* 3.4 3.0 3.2 3.1 3.3 3.2 3.2
GDP Price Index (percent change, year over year):
Administration 2.4 2.2 2.1 2.1 2.1 2.1 2.1
CBO 2.4 1.8 1.8 1.8 1.8 1.8 1.9
Blue Chip, March* 2.6 2.2 2.3 2.2 2.3 2.2 2.3
Consumer Price Index (percent change, year over year):
Administration 3.0 2.4 2.4 2.4 2.4 2.5 2.5
CBO 2.8 2.2 2.2 2.2 2.2 2.2 2.3
Blue Chip, March* 2.9 2.4 2.4 2.5 2.4 2.5 2.4
Unemployment Rate (percent, annual average):
Administration 5.0 5.0 5.0 5.0 5.0 5.0 5.0
CBO 5.0 5.0 5.1 5.2 5.2 5.2 5.1
Blue Chip, March* 4.8 4.9 4.9 4.9 5.0 4.9 4.9
3-Month Treasury Bill Rate (percent, annual average):
Administration 4.2 4.2 4.3 4.3 4.3 4.3 4.3
CBO 4.5 4.5 4.4 4.4 4.4 4.4 4.4
Blue Chip, March* 4.7 4.7 4.4 4.3 4.4 4.4 4.5
10-Year Treasury Note Yield (percent, annual average):
Administration 5.0 5.3 5.5 5.6 5.6 5.6 5.4
CBO 5.1 5.2 5.2 5.2 5.2 5.2 5.2
Blue Chip, March* 4.8 5.0 5.3 5.3 5.4 5.4 5.2
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TABLE 2- ECONOMIC ASSUMPTIONS OF THE BUDGET RESOLUTION
[Calendar years, 2006-2011]
------------------------------------------------------------------------------------------------
2006 2007 2008 2009 2010 2011
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Real GDP (percent change, year over year) 3.6 3.4 3.4 3.3 3.0 2.8
GDP Price Index (percent change, year over year) 2.4 1.8 1.8 1.8 1.8 1.8
Consumer Price Index (percent change, year over year) 2.8 2.2 2.2 2.2 2.2 2.2
Unemployment Rate (percent, annual average) 5.0 5.0 5.1 5.2 5.2 5.2
3-month Treasury Bill Rate (percent, annual average) 4.5 4.5 4.4 4.4 4.4 4.4
10-year Treasury Note Yield (percent, annual average) 5.1 5.2 5.2 5.2 5.2 5.2
Note: Nominal GDP ($ Billions, annual average) 13,262 13,959 14,696 15,455 16,208 16,954
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REVENUE
SUMMARY
The revenue levels reflect all of the Federal Government's various tax receipts that are `on budget.' This includes individual income taxes; corporate income taxes; excise taxes, such as the gasoline tax; and other taxes, such as estate and gift taxes. The component of social insurance taxes that is collected for the Social Security system--the Old Age and Survivors and Disability Insurance [OASDI] payroll tax--is off budget. The remaining social insurance taxes (the Hospital Insurance [HI] payroll tax portion of Medicare, the Federal Unemployment Tax Act [FUTA] payroll tax, railroad retirement and other retirement systems) are all on budget. Customs duties, tariffs, and other miscellaneous receipts also are included in the budget's revenue baseline.
REVENUE OVER TIME
Total Federal tax revenues have averaged about 18 percent of gross domestic product [GDP] over the past 50 years. Even though this budget intends to prevent statutory tax increases, total Federal taxes are projected to rise from 17.5 percent of GDP in fiscal year 2006 to 17.9 percent of GDP in 2011--a return to the historical average level. This increase in taxes as a share of GDP occurs because of the improving economy and because of provisions in the tax code that are not indexed for inflation nor for real, inflation-adjusted, income growth. This phenomenon highlights the need to adjust tax policies periodically to avoid an ever-increasing tax burden on our economy.
On-budget revenue saw a 1-year rise of 17.2 percent from 2004 to 2005, to $1.576 trillion. This included a 14.6-percent increase in individual income tax receipts and a 47-percent increase in corporate income tax receipts. In addition, despite a 2003 reduction in the top capital gains tax rate to 15 percent from 20 percent, capital gains receipts increased 20 percent in 2003, 48 percent in 2004, and 13 percent in 2005.
SUMMARY OF COMMITTEE-REPORTED RESOLUTION
The budget resolution calls for $1,780.666 trillion in on-budget revenue for fiscal year 2007, and $10,039.909 trillion over the period of fiscal years 2007 through 2011. Total revenue in the budget resolution is $2,422.395 trillion for fiscal year 2007 and $13,597.594 trillion over fiscal years 2007 through 2011. The resolution assumes policies with a net revenue-reducing impact of $39.021 billion for fiscal year 2007 and $227.821 billion over the period of fiscal years 2007 through 2011. These effects are principally the result of preventing automatic tax increases that otherwise would occur.
Although the budget resolution does not require specific changes in tax policy, the revenue levels of the resolution are consistent with general policies of not increasing taxes compared to policies currently in place, and of accommodating House-passed tax legislation. In particular, the resolution includes adjustments to revenue of sufficient size to accommodate continuation of specific provisions that are set to expire, including:
--No tax increase resulting from the individual alternative minimum tax [AMT]. The resolution provides for an extension of increased individual AMT exemption amounts. It anticipates that Congress will act to prevent a reduction in the exemptions, to $45,000 for joint filers and $33,750 for single filers.
--No tax increase resulting from the loss of the State sales tax deduction. The resolution provides for an extension of the option to deduct State sales taxes, rather than State income taxes. This policy is especially important in States that have no income tax, such as Florida and Texas.
--No tax increase on families with college students. The resolution could accommodate an extension of the deduction for higher education expenses, which provides relief to parents paying for their child's college education.
The budget resolution assumes extension of the 2001 and 2003 tax relief legislation, as well as extension of other expiring tax provisions. It also could accommodate pension reform legislation already passed by the House and currently in conference committee.
It is important to remember, however, that while the budget resolution could accommodate all of the above policies, it merely sets the aggregate on-budget revenue level of the Federal government for the next 5 years. It is the responsibility of the Committee on Ways and Means to make the specific changes to the tax laws to achieve these levels.
FUNCTION-BY-FUNCTION PRESENTATION
The budget is the broad blueprint of the Congress's general priorities. It is not designed or intended to bind the committees of Congress to any specific program choices. Within this framework, some priority areas may be increased, and lower priorities reduced. Those details will be worked out in the next round, when the committees of jurisdiction write their legislative provisions as is envisioned by the procedures of the Budget Act. The Budget Committee's role is to set a broad, overall recommendation that reflects the Nation's priorities, and set the stage for the programmatic decisions that will be made by the committees of jurisdiction. The following presentation shows the resolution's recommended distribution of budget authority and outlays according to broad categories called `budget functions.'
The budget functions presented here are as follows:
- 050 National Defense
- 150 International Affairs
- 250 Science, Space and Technology
- 270 Energy
- 300 Natural Resources and Environment
- 350 Agriculture
- 370 Commerce and Housing Credit
- 400 Transportation
- 450 Community and Regional Development
- 500 Education, Training, Employment and Social Services
- 550 Health
- 570 Medicare
- 600 Income Security
- 650 Social Security
- 700 Veterans Benefits
- 750 Administration of Justice
- 800 General Government
- 900 Net Interest
- 920 Allowances
- 950 Undistributed Offsetting Receipts
FUNCTION 050: NATIONAL DEFENSE
-
FUNCTION SUMMARY
National Defense includes funds to develop, maintain, and equip the military forces of the United States. More than 95 percent of the funding in this function goes to Department of Defense [DOD] military activities; the remaining funding in the function applies to atomic energy defense activities of the Department of Energy, and other defense-related activities.
For the 5 years ending in 2006, budget authority in this function increased at an average annual rate of 10.9 percent, to $560.5 billion. During the same time period, outlays rose to $525.5 billion, an 11.5-percent average annual growth rate. The largest component of this was the budget of the Department of Defense, whose budget authority grew from $318.8 billion in 2001 to $537.4 billion in 2006. The average annual growth rate for the 5 years ending in 2006 is 11 percent.
SUMMARY OF COMMITTEE-REPORTED RESOLUTION
The resolution calls for $512.9 billion in budget authority and $534.9 billion in outlays in fiscal year 2007. Discretionary spending is $510.2 billion in budget authority and $532.2 billion in outlays in fiscal year 2007. Mandatory spending in 2007 is $2.7 billion in budget authority and $2.7 billion in outlays. The 5-year totals for budget authority and outlays are $13.1 billion and $13.1 billion, respectively. The resolution levels include the effects of the enacted fiscal year 2006 supplementals. The levels also reflect the effects of the House-passed supplemental for fiscal year 2006.
MANDATORY SPENDING
The spending levels for National Defense (Function 050) are based on the Congressional Budget Office's revised baseline spending projections under current law and policies. These levels were adjusted to accommodate legislation that will amend the death gratuity provision in the National Defense Authorization Act for Fiscal Year 2006 (Public Law 109-163). The provision ensures that 300 surviving families of members who died while on active duty after 7 October 2001 receive a retroactive payment of $150,000 due to an increase in Servicemembers' Group Life Insurance that took effect on 1 September 2005. The spending levels also reflect $175 million over 5 years in reconciled mandatory savings (see reconciliation discussion in this report). The Committee on Armed Services will determine the policies that will achieve the required savings.
DISCRETIONARY SPENDING
The discretionary level in this function for fiscal year 2007 is the President's recommended level, as re-estimated by the Congressional Budget Office. The Committee on Appropriations will determine how the overall level of discretionary funding is distributed across its 11 bills, and how much is appropriated for individual programs.
The resolution includes a designation for contingency operations of $50 billion for additional needs in Afghanistan, Iraq, and the global war on terrorism. This is a mid-range estimate for anticipated annual costs. It is not an attempt to predetermine the scope or intensity of operations, troops levels, or which weapons and supplies DOD will need, but rather an effort to make the budget reflect a likely future outlay.
FUNCTION 150: INTERNATIONAL AFFAIRS
-
FUNCTION SUMMARY
This category includes international development and humanitarian assistance; international security assistance; the conduct of foreign affairs; foreign information and exchange activities; and international financial programs. The major agencies in this function include the Departments of Agriculture, State and Treasury, the United States Agency for International Development, and the Millennium Challenge Corporation.
For the 5-year period ending in 2006, International Affairs budget authority rose at an annual average rate of 4.8 percent, from $25.1 billion to $31.8 billion. During the same period, outlays rose from $22.4 billion to $34.2 billion, an 8.8-percent average annual growth rate.
SUMMARY OF COMMITTEE-REPORTED RESOLUTION
The resolution calls for $31.2 billion in budget authority and $34.3 billion in outlays in fiscal year 2007. The function totals are $167.8 billion in budget authority and $166.8 billion in outlays over 5 years. Mandatory spending is -$1.8 billion in budget authority and -$2.8 billion in outlays in fiscal year 2007, and totals -$4.5 billion in budget authority and -$13.1 billion in outlays over 5 years. Discretionary spending is $33.0 billion in budget authority and $37.1 billion in outlays in fiscal year 2007. The resolution levels include the effects of enacted fiscal year 2006 supplementals. The levels also reflect the effects of the House-passed supplemental for fiscal year 2006.
The negative budget authority and outlay levels in mandatory spending reflect receipts of the foreign military sales trust fund, the repayment of loans and credits to foreign nations, and the liquidation of economic assistance loans, foreign military financing loans, Export-Import Bank loans, and housing and other credit guaranty programs.
MANDATORY SPENDING
The spending levels for International Affairs (Function 150) are based on the Congressional Budget Office's revised baseline spending projections under current law and policies, adjusted for reconciliation directives and non-reconciled mandatory policies. These levels were further adjusted to accommodate legislation to reauthorize foreign affairs programs, the appropriations for which are also reflected in the Committee's 302(a) allocations. It also reflects $250 million over 5 years in reconciled mandatory savings (see the reconciliation discussion in this report). The committee of jurisdiction over the reconciled savings will determine the policies to achieve the required savings.
DISCRETIONARY SPENDING
The discretionary level in this function for fiscal year 2007 is the President's recommended level, as re-estimated by the Congressional Budget Office, with various adjustments. The Committee on Appropriations will determine how the overall level of discretionary funding is distributed across its 11 bills, and how much is appropriated for individual programs.
FUNCTION 250: GENERAL SCIENCE, SPACE AND TECHNOLOGY
-
FUNCTION SUMMARY
The largest component of this function--about two-thirds of total spending--is for the space flight, research, and supporting activities of the National Aeronautics and Space Administration [NASA]. The function also contains general science funding, including the budgets for the National Science Foundation [NSF], and the Department of Energy [DOE] Office of Science.
For the 5-year period ending in 2006, budget authority in this function rose an average of 3.5 percent per year, to $25.0 billion. During the same period, outlays rose from $18.6 billion to $24.1 billion, a 4-percent average annual growth rate.
SUMMARY OF COMMITTEE-REPORTED RESOLUTION
The resolution calls for $25.9 billion in budget authority and $25.1 billion in outlays in fiscal year 2007. The function totals are $141.4 billion in budget authority and $136.1 billion in outlays over 5 years. Mandatory spending is $114 million in budget authority and $73 million in outlays in fiscal year 2007, and totals $593 million in budget authority and $502 million in outlays over 5 years. Discretionary spending is $25.8 billion in budget authority and $25.0 billion in outlays in fiscal year 2007. The resolution levels include the effects of enacted fiscal year 2006 supplementals. The levels also reflect the effects of the House-passed supplemental for fiscal year 2006.
MANDATORY SPENDING
The mandatory spending level for General Science, Space, and Technology (Function 250) is based on the Congressional Budget Office's revised baseline spending projections under current laws and policies.
DISCRETIONARY SPENDING
The discretionary spending level for General Science, Space, and Technology (Function 250) is based on the Presidents' budget as re-estimated by the Congressional Budget Office, with various adjustments. The Committee on Appropriations will determine how the overall level of discretionary funding is distributed across its 11 bills, and how much is appropriated for individual programs.
In a budget with an overall discretionary increase of 3.6 percent, the committee assumes robust funding for the American Competitiveness Initiative, portions of which are absorbed in such functional categories in this resolution as Functions 370 (Commerce) and 920 (Allowances).
FUNCTION 270: ENERGY
-
FUNCTION SUMMARY
This category includes civilian energy and environmental programs of the Department of Energy [DOE]. Function 270 also includes the Rural Utilities Service of the Department of Agriculture, the Tennessee Valley Authority [TVA], the Federal Energy Regulatory Commission, and the Nuclear Regulatory Commission. (It does not include DOE's national security activities--the National Nuclear Security Administration--which are in Function 050, or its basic research and science activities, which are in Function 250.)
Budget authority in this function was $1.8 billion in 2006 with outlays of $2.0 billion. Receipts, repayments, and electricity sales (negative spending) result in sharp year-by-year fluctuations in this function's budget authority and outlays.
SUMMARY OF COMMITTEE-REPORTED RESOLUTION
The resolution calls for $2.3 billion in budget authority and $915 million in outlays in fiscal year 2007. The function totals are $11.6 billion in budget authority and $4.1 billion in outlays over 5 years. Mandatory spending is -$1.6 billion in budget authority and -$3.0 billion in outlays in fiscal year 2007. Discretionary spending is $3.8 billion in budget authority and $3.9 billion in outlays in fiscal year 2007.
MANDATORY SPENDING
The mandatory levels for Energy (Function 270) are based on the Congressional Budget Office's revised baseline spending projections under current law and policies.
DISCRETIONARY SPENDING
The discretionary level in this function for fiscal year 2007 is the President's recommended level, as re-estimated by the Congressional Budget Office. The Committee on Appropriations will determine how the overall level of discretionary funding is distributed across its 11 bills, and how much is appropriated for individual programs.
FUNCTION 300: NATURAL RESOURCES AND ENVIRONMENT
-
FUNCTION SUMMARY
The Natural Resources and Environment category consists of water resources, conservation, land management, pollution control and abatement, and recreational resources. Major departments and agencies in this function are the Department of Interior, including the National Park Service [NPS], the Bureau of Land Management [BLM], the Bureau of Reclamation, and the Fish and Wildlife Service [FWS]; conservation-oriented and land management agencies within the Department of Agriculture [USDA], including the Forest Service; the National Oceanic and Atmospheric Administration [NOAA] in the Department of Commerce; the Army Corps of Engineers; and the Environmental Protection Agency [EPA].
Budget authority in this function for the 5-year period ending in 2006 rose an average of 3.9 percent per year, to $35.2 billion. During the same period, outlays increased at a 4.9-percent rate, to $32.6 billion.
SUMMARY OF COMMITTEE-REPORTED RESOLUTION
The resolution calls for $29.7 billion in budget authority and $33.0 billion in outlays in fiscal year 2007. The function totals are $145.0 billion in budget authority and $153.1 billion in outlays over 5 years. Mandatory spending is $1.5 billion in budget authority and $0.4 billion in outlays in fiscal year 2007. Over the 2007-11 period, mandatory spending totals $6.2 billion in budget authority and $4.7 billion in outlays. Discretionary spending is $28.2 billion in budget authority and $32.6 billion in outlays in fiscal year 2007. The resolution levels include the effects of enacted fiscal year 2006 supplementals. The levels also reflect the effects of the House-passed supplemental for fiscal year 2006.
MANDATORY SPENDING
The mandatory spending levels for Natural Resources and Environment (Function 300) are based on the Congressional Budget Office's revised baseline spending projections under current law and policies. The levels were adjusted upwards by $6 million over 5 years to accommodate mandatory spending in the Threatened and Endangered Species Recovery Act, and further increased, by $22 million, to accommodate mandatory spending associated with reauthorization of the Water Resources Development Act, which are also reflected in the Committee's 302(a) allocations (see 302(a) allocations). The mandatory spending level does not include any savings from policies associated with the Arctic National Wildlife Refuge, nor is there a reconciliation directive for the Committee on Resources.
DISCRETIONARY SPENDING
The discretionary level in this function for fiscal year 2007 is the President's recommended level, as re-estimated by the Congressional Budget Office. The Committee on Appropriations will determine how the overall level of discretionary funding is distributed across its 11 bills, and how much is appropriated for individual programs.
FUNCTION 350: AGRICULTURE
-
FUNCTION SUMMARY
The agriculture category includes funds for direct assistance and loans to food and fiber producers; export assistance; market information; inspection services; and agricultural research. Farm policy is driven by the Farm Security and Rural Investment Act of 2002, which provides producers with continued planting flexibility while protecting them against unique uncertainties, such as poor weather conditions and unfavorable market conditions.
Budget authority and outlays in this function have declined by less than 1 percent per year over the past 5 years, to $28.3 billion. During the same time period, outlays increased by less than 1 percent to $26.5 billion. Spending for fiscal year 2006 was near the average over the preceding 5 years, but spending across the period has been highly variable because agricultural commodity prices fluctuated widely. This has a significant impact on mandatory programs, which account for the vast majority of spending within Function 350.
SUMMARY OF COMMITTEE-REPORTED RESOLUTION
The resolution calls for $27.4 billion in budget authority and $26.8 billion in outlays in fiscal year 2007. The function totals are $123.5 billion in budget authority and $120.0 billion in outlays over 5 years. Mandatory spending is $21.7 billion in budget authority and $20.8 billion in outlays in fiscal year 2007. Over the five year period, mandatory spending totals $95.5 billion in budget authority and $91.8 billion in outlays. Discretionary spending is $5.7 billion in budget authority and $5.9 billion in outlays in fiscal year 2007. The resolution levels include the effects of enacted fiscal year 2006 supplementals. The levels also reflect the effects of the House-passed supplemental for fiscal year 2006.
MANDATORY SPENDING
The spending levels for Agriculture (Function 350) are based on the Congressional Budget Office's revised baseline spending projections under current law and policies. These levels were adjusted to reflect $51 million over 5 years in reconciled mandatory savings (see reconciliation). The Agriculture Committee will determine the policies to achieve the required savings.
DISCRETIONARY SPENDING
The discretionary level for Agriculture (Function 350) for fiscal year 2007 is based on the President's level as re-estimated by the Congressional Budget Office. The Committee on Appropriations will determine how the overall level of discretionary funding is distributed across its 11 bills, and how much is appropriated for individual programs.
FUNCTION 370: COMMERCE AND HOUSING CREDIT
-
FUNCTION SUMMARY
This category has four components: mortgage credit (usually negative budget authority because receipts tend to exceed the losses from defaulted mortgages); the Postal Service (mostly off budget); deposit insurance (negligible spending due to reserve supporting fees, and the like); and other advancement of commerce (most of the discretionary and mandatory spending in this function).
The mortgage credit component of this function includes housing assistance through the Federal Housing Administration [FHA], the Federal National Mortgage Association [Fannie Mae], the Federal Home Loan Mortgage Corporation [Freddie Mac], the Government National Mortgage Association [Ginnie Mae], and rural housing programs of the Department of Agriculture. The function also includes net postal service spending and spending for deposit insurance activities of banks, thrifts, and credit unions. Finally, most, but not all, of the Department of Commerce is provided for in this function including the International Trade Administration, Bureau of Economic Analysis, Patent and Trademark Office, National Institute of Standards and Technology, National Telecommunications and Information Administration, and the Bureau of the Census; as well as independent agencies such as the Securities and Exchange Commission, the Commodity Futures Trading Commission, the Federal Trade Commission, the Federal Communications Commission, and the majority of the Small Business Administration.
More than two-thirds of the spending in Function 370 is from the Federal Communication Commission's Universal Service Fund. This fund collects receipts derived by certain telecommunications operators from charges on their consumers and customers to promote service to low-income users, e-rate for schools and libraries and high-cost areas, as well as new services.
For the 5-year period ending in 2006, on-budget budget authority in this function increased an average of 11.9 percent per year, to $14.5 billion in 2006. In the same period, outlays rose 14.2 percent per year, to $7.9 billion. Off-budget budget authority in this function decreased an average of 183 percent per year, dropping to -$1.4 billion in 2006. In the same period, outlays declined 190 percent per year, to -$1.4 billion.
SUMMARY OF COMMITTEE-REPORTED RESOLUTION
For on-budget amounts, the resolution calls for $16.0 billion in budget authority and $7.5 billion in outlays in fiscal year 2007, of which $16.5 billion in budget authority and $8.0 billion in outlays are on budget, and -$500 million in budget authority and -$500 million in outlays are off budget. The function totals are $60.0 billion in budget authority and $26.4 billion in outlays over 5 years, of which $71.9 billion in budget authority and $38.3 billion in outlays are on budget, and -$11.9 billion in budget authority and -$11.9 billion in outlays are off budget. Mandatory spending is $12.9 billion in budget authority and $4.0 billion in outlays in fiscal year 2007, of which $13.4 billion in budget authority and 4.5 billion in outlays is on budget, and -$500 million in budget authority and -$500 million in outlays are off budget. Mandatory spending over 5 years totals $42.1 billion in budget authority and $7.9 billion in outlays, of which $54.0 billion in budget authority and 19.8 billion in outlays are on budget, and -$11.9 billion in budget authority and -$11.9 billion in outlays are off budget Discretionary spending is $3.1 billion in budget authority and $3.5 billion in outlays in fiscal year 2007, all of which is on budget. The resolution levels include the effects of enacted fiscal year 2006 supplementals. The levels also reflect the effects of the House-passed supplemental for fiscal year 2006.
MANDATORY SPENDING
The spending levels for Commerce and Housing Credit (Function 370) are based on the Congressional Budget Office's revised baseline spending projections under current law and policies. These levels were adjusted to accommodate enactment of H.R. 3505, the Financial Services Regulatory Relief Act.
The budget resolution also includes a reserve fund for enactment of H.R. 1461, the Federal Housing Finance Reform Act.
DISCRETIONARY SPENDING
The Committee on Appropriations will determine how the overall level of discretionary funding is distributed across its 11 bills, and how much is appropriated for individual programs.
FUNCTION 400: TRANSPORTATION
-
FUNCTION SUMMARY
This category includes ground, air, water and other transportation funding. The major agencies and programs here include the Department of Transportation (including the Federal Aviation Administration; the Federal Highway Administration; the Federal Transit Administration; highway, motor carrier, rail and pipeline safety programs; and the Maritime Administration); the Department of Homeland Security (including the Federal Air Marshals, the Transportation Security Administration, and the U.S. Coast Guard); the aeronautical activities of the National Aeronautics and Space Administration [NASA]; and the National Railroad Passenger Corporation [Amtrak].
For the 5 years ending in 2006, budget authority in this function increased at an average annual rate of 2.1 percent, from $67.4 billion to $74.9 billion. During the same time period, outlays rose from $54.4 billion to $70.9 billion, a 5.4-percent average annual growth rate. The largest component of the totals is the budget of the Department of Transportation, whose budget authority grew from $61.6 billion in 2001 to $64.6 billion in 2006, a 1.0-percent average annual growth rate.
SUMMARY OF COMMITTEE-REPORTED RESOLUTION
The resolution calls for $78.3 billion in budget authority and $75.8 billion in outlays in fiscal year 2007. The function totals are $378.8 billion in budget authority and $388.3 billion in outlays over 5 years. Mandatory spending is $55.3 billion in budget authority and $2.0 billion in outlays in fiscal year 2007, and totals $258.9 billion in budget authority and $11.2 billion in outlays over 5 years. Discretionary spending is $22.9 billion in budget authority and $73.8 billion in outlays in fiscal year 2007. The resolution levels include the effects of enacted fiscal year 2006 supplementals. The levels also reflect the effects of the House-passed supplemental for fiscal year 2006.
The Committee on Transportation and Infrastructure has programs that spend out of the Highway Trust Fund, in which budget authority is defined as mandatory. The resulting outlays, however, are characterized as discretionary, and are scored against the Appropriations Committee. That committee constrains the outlays through appropriations act language known as `obligation limitations.'
MANDATORY SPENDING
The spending levels for Transportation (Function 400) are based on the Congressional Budget Office's revised baseline spending projections under current law and policies. The levels also reflect $50 million over 5 years in reconciled mandatory savings (see the reconciliation discussion in this report). The Committee on Transportation and Infrastructure will determine the policies that will achieve the required savings.
DISCRETIONARY SPENDING
The discretionary level in this function for fiscal year 2007 is the President's recommended level, as re-estimated by the Congressional Budget Office. The resolution does not specifically assume the President's proposed passenger rail funding levels or the President's proposed increases to aviation security fees. The Committee on Appropriations will determine how the overall level of discretionary funding is distributed across its 11 bills, and how much is appropriated for individual programs.
FUNCTION 450: COMMUNITY AND REGIONAL DEVELOPMENT
-
FUNCTION SUMMARY
This category includes programs that provide Federal funding for economic and community development in both urban and rural areas, including: Community Development Block Grants [CDBGs]; the non-power activities of the Tennessee Valley Authority; the non-roads activities of the Appalachian Regional Commission; the Economic Development Administration [EDA]; and partial funding for the Bureau of Indian Affairs.
Homeland Security spending in this function includes the State and local government grant programs of the Department of Homeland Security.
For the 5 years ending in 2006, budget authority in this function increased at an average annual rate of 21.4 percent to $38.3 billion. Outlays rose at a rate of 38.5 percent per year, to $59.9 billion. A factor in this growth was Federal Emergency Management Agency [FEMA] funding for disaster relief in the aftermath of Hurricanes Katrina and Rita.
SUMMARY OF COMMITTEE-REPORTED RESOLUTION
The resolution calls for $15.9 billion in budget authority and $31.3 billion in outlays in fiscal year 2007. The function totals are $68.0 billion in budget authority and $109.9 billion in outlays over 5 years. Mandatory spending is $2.9 billion in budget authority and $2.7 billion in outlays in fiscal year 2007, and totals $2.3 billion in budget authority and $1.1 billion in outlays over 5 years. Discretionary spending is $13.0 billion in budget authority and $28.7 billion in outlays in fiscal year 2007. The resolution levels include the effects of enacted fiscal year 2006 supplementals. The levels also reflect the effects of the House-passed supplemental for fiscal year 2006.
MANDATORY SPENDING
The spending levels for Community and Regional Development (Function 450) are based on Congressional Budget Office's revised baseline spending projections under current law and policies. These levels were adjusted to accommodate $400 million over 5 years in reconciled mandatory savings (see reconciliation). The Committee on Financial Services will determine the policies that will achieve the required savings. The levels for fiscal year 2006 have been adjusted to reflect enactment of increased borrowing authority for the National Flood Insurance Program (Public Law 109-208).
The budget resolution also includes a reserve fund for increased borrowing authority for the National Flood Insurance Program to pay outstanding claims resulting from Hurricanes Katrina and Rita, in conjunction with enactment of various reforms to the program.
DISCRETIONARY SPENDING
The discretionary level in this function for fiscal year 2007 is the President's recommended level, as re-estimated by the Congressional Budget Office, with the following adjustment: the starting level was increased $1.3 billion, which could accommodate additional funding for Community Development Block Grants. The resolution does not assume the President's Strengthening America's Communities Initiative [SACI]. The Committee on Appropriations will determine how the overall level of discretionary funding is distributed across its 11 bills, and how much is appropriated for individual programs.
FUNCTION 500: EDUCATION, TRAINING, EMPLOYMENT, AND SOCIAL SERVICES
-
FUNCTION SUMMARY
This category primarily covers Federal spending within the Departments of Education, Labor, and Health and Human Services for programs that directly provide--or assist States and localities in providing--services to young people and adults. Its activities provide developmental services to low-income children; help fund programs for disadvantaged and other elementary and secondary school students; make grants and loans to post secondary students; and fund job-training and employment services for people of all ages.
For the 5 years ending in 2006, budget authority in this function increased at an average annual rate of 12.1 percent, from $63.6 billion to $112.6 billion. During the same time period, outlays rose from $57.1 billion to $106.4 billion, at a 13.3-percent average annual growth rate.
SUMMARY OF COMMITTEE-REPORTED RESOLUTION
The resolution calls for $84.8 billion in budget authority and $87.5 billion in outlays in fiscal year 2007. The function totals are $419.7 billion in budget authority and $421.3 billion in outlays over 5 years. Mandatory spending is $10.2 billion in budget authority and $9.4 billion in outlays in fiscal year 2007, and totals $53.3 billion in budget authority and $47.9 billion in outlays over 5 years. Discretionary spending is $74.7 billion in budget authority and $78.1 billion in outlays in fiscal year 2007. The resolution levels include the effects of enacted fiscal year 2006 supplementals. The levels also reflect the effects of the House-passed supplemental for fiscal year 2006.
MANDATORY SPENDING
The spending levels for Education, Training, Employment, and Social Services (Function 500) are based on the Congressional Budget Office's revised baseline spending projections under current law and policies.
Although the committee strongly supports the Federal student loan programs, members remain concerned that the baselines for student loans may not provide a sufficiently accurate indication of true economic costs. This concern was validated by the publication of reports last year by two different congressional support agencies. Both of the reports--one published by the Congressional Budget Office and the other by the Government Accountability Office--found the subsidy cost estimates calculated under the Credit Reform Act do not fully capture all governmental costs associated with the Direct Loan program.
The Budget Committee is committed to working with both the Committee on Education and the Workforce and the Congressional Budget Office to identify additional cost factors that could be incorporated into future baselines and subsidy estimates. Through the use of studies and other analyses, the committee looks forward to identifying and evaluating other quantifiable factors that might significantly contribute to the certainty and accuracy of student loan estimates.
DISCRETIONARY SPENDING
The discretionary level in this function for fiscal year 2007 is the President's recommended level, as re-estimated by the Congressional Budget Office. The resolution does not specifically assume the President's proposed funding levels for the Individuals with Disabilities Education Act [IDEA] program. The Committee on Appropriations will determine how the overall level of discretionary funding is distributed across its 11 bills, and how much is appropriated for individual programs.
FUNCTION 550: HEALTH
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FUNCTION SUMMARY
This function consists of health care services, including Medicaid, the Nation's major program covering medical and long-term care costs for low-income persons; the State Children's Health Insurance Program [SCHIP], health research and training, including the National Institutes of Health [NIH] and substance abuse prevention and treatment; and consumer and occupational health and safety, including the Occupational Safety and Health Administration. Medicaid represents 71 percent of the spending in this function.
Homeland security spending in this function includes funding for Project Bioshield; the NIH, including the National Institute of Allergy and Infectious Diseases; the Food Safety and Inspection Service; and the Food and Drug Administration.
For the 5 years ending in 2006, budget authority in this function rose an average annual rate of 8.0 percent per year, to $267.4 billion. During the same period, outlays rose from $172.3 billion to $264.4 billion, a 9.0-percent average annual growth rate. The largest component of this growth was Medicaid, whose Federal payments grew an average of 8.4 percent per year, to $189.8 billion.
SUMMARY OF COMMITTEE-REPORTED RESOLUTION
The resolution calls for $275.8 billion in budget authority and $274.3 billion in outlays in fiscal year 2007. The function totals are $1,551.3 billion in budget authority and $1,547.6 billion in outlays over 5 years. Mandatory spending is $222.8 billion in budget authority and $221.2 billion in outlays in fiscal year 2007, and totals $1,297.2 billion in budget authority and $1,290.8 billion in outlays over 5 years. Discretionary spending is $53.0 billion in budget authority and $53.1 billion in outlays in fiscal year 2007. The resolution levels include the effects of enacted fiscal year 2006 supplementals.
MANDATORY SPENDING
The spending levels for Health (Function 550) are based on the Congressional Budget Office's revised baseline spending projections under current law and policies. The committee with jurisdiction over programs in this function is the Committee on Energy and Commerce. The resolution does not assume any reductions in Medicaid.
DISCRETIONARY SPENDING
The discretionary level in this function for fiscal year 2007 is the President's recommended level, as re-estimated by the Congressional Budget Office. The Committee on Appropriations will determine how the overall level of discretionary funding is distributed across its 11 bills, and how much is appropriated for individual programs. The budget resolution also includes a special exemption from Congressional budget controls, capped at $2.3 billion in fiscal year 2007, for emergency spending measures to combat avian influenza.
FUNCTION 570: MEDICARE
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FUNCTION SUMMARY
This budget function reflects the Medicare Part A Hospital Insurance [HI] Program, Part B Supplementary Medical Insurance [SMI] Program, Part C Medicare Advantage Program, and Part D Prescription Drug Benefit, as well as premiums paid by qualified aged and disabled beneficiaries. On 8 December 2003, Congress and the President enacted the Medicare Prescription Drug, Improvement, and Modernization Act [MMA]. MMA changed Medicare Part C from the Medicare+Choice Program to the Medicare Advantage Program and added the Part D Prescription Drug Benefit to the Medicare Program.
For the 5 years ending in 2006, budget authority in this function increased at an average annual rate of 9.2 percent, to $336.9 billion. During the same time period, outlays rose from $217.4 billion to $331.5 billion, a 8.8-percent average annual growth rate. This function consists entirely of the Medicare program.
SUMMARY OF COMMITTEE-REPORTED RESOLUTION
The resolution calls for $382.8 billion in budget authority and $388.3 billion in outlays in fiscal year 2007. The function totals are $2,235.7 billion in budget authority and $2,241.3 billion in outlays over 5 years. Mandatory spending is $377.8 billion in budget authority and $383.4 billion in outlays in fiscal year 2007, and totals $2,211.4 billion in budget authority and $2,217.0 billion in outlays over 5 years. Discretionary spending is $5.0 billion in budget authority and $4.9 billion in outlays in fiscal year 2007. The resolution levels include the effects of enacted fiscal year 2006 supplementals.
MANDATORY SPENDING
The spending levels for Medicare (Function 570) are based on the Congressional Budget Office's revised baseline spending projections under current law and policies. The resolution does not assume any reductions in Medicare. Committees with jurisdiction over programs in this function are the Committees on Energy and Commerce and Ways and Means.
DISCRETIONARY SPENDING
The discretionary level in this function for fiscal year 2007 is the President's recommended level, as re-estimated by the Congressional Budget Office. The Committee on Appropriations will determine how the overall level of discretionary funding is distributed across its 11 bills, and how much is appropriated for individual programs.
FUNCTION 600: INCOME SECURITY
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FUNCTION SUMMARY
This category includes most of the Federal Government's income support programs. These include: general retirement and disability insurance (excluding Social Security)--mainly through the Pension Benefit Guaranty Corporation [PBGC]--and benefits to railroad retirees. Other components are Federal employee retirement and disability benefits (including military retirees); unemployment compensation; low-income housing assistance, including section 8 housing; food and nutrition assistance, including food stamps and school lunch subsidies; and other income security programs.
This last category includes: Temporary Assistance to Needy Families [TANF], the Government's principal welfare program; Supplemental Security Income [SSI]; spending for the refundable portion of the Earned Income Credit [EIC]; and the Low Income Home Energy Assistance Program [LIHEAP]. Agencies involved in these programs include the Departments of Agriculture, Health and Human Services, Housing and Urban Development, the Social Security Administration (for SSI), and the Office of Personnel Management (for Federal retirement benefits).
For the 5 years ending in 2006, budget authority in this function increased at an average annual rate of 4.8 percent, to $346.4 billion. Outlays rose an average of 5.8 percent per year in the same period, to $356.9 billion in 2006.
SUMMARY OF COMMITTEE-REPORTED RESOLUTION
The resolution calls for $356.8 billion in budget authority and $362.1 billion in outlays in fiscal year 2007. The function totals are $1,908.0 billion in budget authority and $1,920.8 billion in outlays over 5 years. Mandatory spending is $309.1 billion in budget authority and $307.2 billion in outlays in fiscal year 2007, and totals $1,669.5 billion in budget authority and $1,657.3 billion in outlays over 5 years. Discretionary spending is $47.7 billion in budget authority and $54.9 billion in outlays in fiscal year 2007. The resolution levels include the effects of enacted fiscal year 2006 supplementals.
MANDATORY SPENDING
The spending levels for Income Security (Function 600) are based on the Congressional Budget Office's revised baseline spending projections under current law and policies. The levels for fiscal year 2006 are modified to reflect the enactment of Public Law 109-176, emergency unemployment compensation related to Hurricane Katrina. The fiscal year 2007 levels are adjusted to accommodate legislation to strengthen the Nation's private pension system through the Pension Benefit Guaranty Corporation. The levels also reflect $2.1 billion over 5 years in reconciled mandatory savings (see the reconciliation discussion in this report). Committees with jurisdiction will determine the policies that will achieve the required savings.
DISCRETIONARY SPENDING
The discretionary level in this function for fiscal year 2007 is the President's recommended level, as re-estimated by the Congressional Budget Office, adjusted to reflect enactment of Public Law 109-204, which shifts funding provided in the Deficit Reduction Act of 2005 for the Low Income Home Energy Assistance Program [LIHEAP] from fiscal year 2007. In addition, the starting level in this function was reduced by $100 million to accommodate increased funding for community and regional development programs in Community and Regional Development (Function 450). The Committee on Appropriations will determine how the overall level of discretionary funding is distributed across its 11 bills, and how much is appropriated for individual programs.
FUNCTION 650: SOCIAL SECURITY
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FUNCTION SUMMARY
This category consists of the Social Security Program, or Old Age, Survivors, and Disability Insurance [OASDI]. It is the largest budget function in terms of outlays, and provides funds for the Government's largest entitlement program. Under provisions of the Congressional Budget Act and the Budget Enforcement Act, Social Security trust funds are considered to be off-budget. But a small portion of spending within Function 650--including general fund transfers of taxes paid on Social Security benefits--is on-budget. Therefore, although the discussion below describes both the on-budget and off-budget components, the budget resolution itself contains only the on-budget portion.
For the 5 years ending in 2006, on-budget budget authority rose from $14 billion in 2002 to $14.8 billion in 2006; the average annual growth for the 5-year period 2002-06 is 4.8 percent. During the same period, outlays rose from $14 billion to $14.8 billion, a 4.8-percent average annual growth rate.
For off-budget spending during the 5 years ending in 2006, budget authority rose from $448 billion in 2002 to $542.1 billion in 2006; the average annual growth for the 5-year period ending in 2006 is 4.8 percent. During the same period, outlays rose from $442 billion to $539.8 billion, a 5.1-percent average annual growth rate.
SUMMARY OF COMMITTEE-REPORTED RESOLUTION
For on-budget spending, the resolution calls for $16.9 billion in budget authority and $16.9 billion in outlays in fiscal year 2007. The function totals are $105.8 billion in budget authority and $105.8 billion in outlays over 5 years. Mandatory spending is $16.9 billion in budget authority and $16.9 billion in outlays in fiscal year 2007, and totals $105.8 billion in budget authority and $105.8 billion in outlays over 5 years. There is no on-budget discretionary spending in this function.
For off-budget spending, the resolution calls for $568.6 billion in budget authority and $566.4 billion in outlays in fiscal year 2007. The function totals are $3,139.9 billion in budget authority and $3,125.8 billion in outlays over 5 years. Mandatory spending is $563.8 billion in budget authority and $561.6 billion in outlays in fiscal year 2007, and totals $3,116.6 billion in budget authority and $3,102.5 billion in outlays over 5 years. Discretionary spending is $4.8 billion in budget authority and $4.8 billion in outlays in fiscal year 2007, and totals $23.3 billion in budget authority and $23.3 billion in outlays over 5 years.
MANDATORY SPENDING
The mandatory level for Social Security (Function 650) are based on the Congressional Budget Office's revised baseline spending projections under current law and policies.
DISCRETIONARY SPENDING
The discretionary level in this function for fiscal year 2007 is the President's recommended level, as re-estimated by the Congressional Budget Office. The Committee on Appropriations will determine how the overall level of discretionary funding is distributed across its 11 bills, and how much is appropriated for individual programs.
FUNCTION 700: VETERANS BENEFITS AND SERVICES
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FUNCTION SUMMARY
This category includes funding for the Department of Veterans Affairs [VA], which provides benefits to veterans who meet various eligibility rules. Benefits range from income security for veterans, principally disability compensation and pensions; veterans education, training, and rehabilitation services; hospital and medical care for veterans; and other veterans' benefits and services, such as home loan guarantees. There are approximately 24 million veterans.
For the 5 years ending in 2006, budget authority in this function increased at an average annual rate of 8.6 percent to $72 billion. Outlays in the same period rose 9.3 percent per year, to $70.1 billion in 2006.
SUMMARY OF COMMITTEE-REPORTED RESOLUTION
The resolution calls for $74.6 billion in budget authority and $73.9 billion in outlays in fiscal year 2007. The function totals are $390 billion in budget authority and $389.6 billion in outlays over 5 years. Mandatory spending is $37.8 billion in budget authority and $37.7 billion in outlays in fiscal year 2007, and totals $214.4 billion in budget authority and $214.2 billion in outlays over 5 years. Discretionary spending is $36.9 billion in budget authority and $36.3 billion in outlays in fiscal year 2007. The resolution levels include the effects of enacted fiscal year 2006 supplementals. The levels also reflect the effects of the House-passed supplemental for fiscal year 2006. The resolution assumes no reduction to VA medical care.
MANDATORY SPENDING
The spending levels for Veterans Benefits and Services (Function 700) are based on the Congressional Budget Office's revised baseline spending projections under current law and policies.
DISCRETIONARY SPENDING
The discretionary level in this function for fiscal year 2007 is the President's recommended level, as re-estimated by the Congressional Budget Office, with the following adjustment: during markup, the Committee on the Budget adopted an amendment by Mr. Bradley increasing budget authority over the President's level by $795 million for fiscal year 2007 and $3.975 billion over 2007-11; and decreasing International Affairs (Function 150) by a like amount. The level does not assume the President's proposal to implement enrollment fees and increase drug co-pays for Priority 7 and 8 veterans. The Committee on Appropriations will determine how the overall level of discretionary funding is distributed across its 11 bills, and how much is appropriated for individual programs.
FUNCTION 750: ADMINISTRATION OF JUSTICE
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FUNCTION SUMMARY
This category supports the majority of Federal justice and law enforcement programs and activities. This includes funding for the Department of Justice; the financial law enforcement activities of the Department of the Treasury; Federal courts and prisons; and criminal justice assistance to State and local governments. Homeland security spending in this function includes funding for the law enforcement and border protection activities of the Department of Homeland Security, and the counterterrorism activities of the Departments of Justice and Treasury.
For the 5 years ending in 2006, budget authority in this function rose an average of 5 percent per year, to $40.7 billion. Outlays rose to $40.8 billion in the same period, an average of 6.2 percent per year.
SUMMARY OF COMMITTEE-REPORTED RESOLUTION
The resolution calls for $42.8 billion in budget authority and $43.6 billion in outlays in fiscal year 2007. The function totals are $217.8 billion in budget authority and $219.3 billion in outlays over 5 years. Mandatory spending is $2.1 billion in budget authority and $1.3 billion in outlays in fiscal year 2007, and totals $4.1 billion in budget authority and $3.9 billion in outlays over 5 years. Discretionary spending is $40.7 billion in budget authority and $42.4 billion in outlays in fiscal year 2007. The resolution levels include the effects of enacted the enacted fiscal year 2006 supplementals. The levels also reflect the effects of the House-passed supplemental for fiscal year 2006.
MANDATORY SPENDING
The mandatory levels for Administration of Justice (Function 750) are based on the Congressional Budget Office's baseline spending projections under current law and policies. These levels were adjusted to accommodate legislation that reorganizes the Ninth Circuit and creates additional judgeships, and a cost of living adjustment for Federal judges, which are also reflected in the Judiciary Committee's 302(a) allocations. The resolution also assumes reconciliation savings for the Committee on the Judiciary, which are reflected in Allowances (Function 920).
DISCRETIONARY SPENDING
The discretionary level in this function for fiscal year 2007 is the President's recommended level, as re-estimated by the Congressional Budget Office, with an adjustment to provide $900 million for Byrne Justice Assistance Grants. The Committee on Appropriations will determine how the overall level of discretionary funding is distributed across its 11 bills, and how much is appropriated for individual programs.
FUNCTION 800: GENERAL GOVERNMENT
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FUNCTION SUMMARY
General Government consists of the activities of the Legislative Branch; the Executive Office of the President; general tax collection and fiscal operations of the Department of Treasury (including the Internal Revenue Service); the Office of Personnel Management, and the property and personnel costs of the General Services Administration; general purpose fiscal assistance to States, localities, the District of Columbia, and U.S. territories; and other general Government activities.
For the 5-year period ending in 2006, General Government budget authority increased at an annual average rate of 0.9 percent, from $17.9 billion to $18.7 billion. During the same time period, outlays rose from $16.9 billion to $18.9 billion, a 2.3-percent average annual growth rate.
SUMMARY OF COMMITTEE-REPORTED RESOLUTION
The resolution calls for $19.0 billion in budget authority and $18.9 billion in outlays in fiscal year 2007. The function totals are $92.4 billion in budget authority and $91.5 billion in outlays over 5 years. Mandatory spending is $2.2 billion in budget authority and $2.2 billion in outlays in fiscal year 2007, and totals $10.5 billion in budget authority and $10.5 billion in outlays over 5 years. Discretionary spending is $16.8 billion in budget authority and $16.7 billion in outlays in fiscal year 2007. The resolution levels include the effects of enacted fiscal year 2006 supplementals. The levels also reflect the effects of the House-passed supplemental for fiscal year 2006.
MANDATORY SPENDING
The spending levels for General Government (Function 800) are based on the Congressional Budget Office's revised baseline spending projections under current law and policies, adjusted for non-reconciled mandatory policies. These levels were adjusted to accommodate legislation to allow time spent at service academies to be considered creditable under the Civil Service Retirement System and the Federal Employee Retirement System, which are also reflected in the Committee's 302(a) allocations (see 302(a) allocations). It also reflects $25 million over 5 years in reconciled mandatory savings (see the reconciliation discussion in this report). The committee with jurisdiction over the reconciled savings will determine the policies to achieve the required savings.
The budget resolution also includes reserve funds for the disposal of underutilized Federal real property and the reauthorization of the Secure Rural Schools and Community Self-Determination Act (Public Law 106-393).
DISCRETIONARY SPENDING
The discretionary level in this function for fiscal year 2007 is the President's recommended level, as re-estimated by the Congressional Budget Office. The Committee on Appropriations will determine how the overall level of discretionary funding is distributed across its 11 bills, and how much is appropriated for individual programs.
FUNCTION 900: NET INTEREST
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FUNCTION SUMMARY
The category includes net interest, which is the interest paid for the Federal Government's borrowing less the interest received by the Federal Government from trust fund investments and loans to the public. It is a mandatory payment, with no discretionary components.
For the 2001-06 period, budget authority and outlays increased by an average of 1.1 percent a year, to $218.2 billion in fiscal year 2006.
SUMMARY OF COMMITTEE-REPORTED RESOLUTION
The resolution calls for $247.1 billion in budget authority and outlays in fiscal year 2007. The function totals are $1,377.2 billion in budget authority and outlays over 5 years. On-budget spending is $354.1 billion in budget authority and outlays in fiscal year 2007, and totals $2,019.8 billion in budget authority and outlays over 5 years. Off-budget spending is -$107.0 billion in budget authority and outlays in fiscal year 2007; and over 5 years, it is -$642.6 billion in budget authority and outlays.
MANDATORY SPENDING
There are no specific mandatory assumptions in this function.
FUNCTION 920: ALLOWANCES
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FUNCTION SUMMARY
This category is used for planning purposes to address the budgetary effects of proposals or assumptions that cross various other budget functions. Once such changes are enacted, the budgetary effects are distributed to the appropriate budget functions in past years.
SUMMARY OF COMMITTEE-REPORTED RESOLUTION
The function totals are $4.1 billion in budget authority and $3.4 billion in outlays for fiscal year 2007; and -$26.0 billion in budget authority and -$22.3 billion in outlays for 2007-11.
MANDATORY SPENDING
The resolution calls for -$0.2 billion in mandatory budget authority and outlays for fiscal year 2007; and -$3.7 billion in budget authority and outlays for 2007-11. It reflects reconciled mandatory savings that were not distributed among the budget functions.
DISCRETIONARY SPENDING
The resolution calls for $4.3 billion in discretionary budget authority and $3.7 billion in outlays for fiscal year 2007; and -$22.3 billion in budget authority and -$18.7 billion in outlays for 2007-11. It includes $4.4 billion in budget authority in an emergency reserve for 2007 to anticipate a response to natural disaster. The $4.4-billion figure is the median of emergency spending during the past 10 years for accounts typically associated with spending in response to natural disasters.
FUNCTION 950: UNDISTRIBUTED OFFSETTING RECEIPTS
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FUNCTION SUMMARY
This function consists of receipts to the Treasury. Receipts recorded in this function are either intrabudgetary (a payment from one Federal agency to another, such as agency payments to the retirement trust funds) or proprietary (a payment from the public for some kind of business transaction with the government). The main types of receipts recorded in this function are: the payments Federal employees and agencies make to employee retirement trust funds; payments made by companies for the right to explore and produce oil and gas on the Outer Continental Shelf, and payments by those who bid for the right to buy or use public property or resources, such as the electromagnetic spectrum. These receipts are treated as negative spending.
Because increases in on-budget receipts appear as negative spending, for the 5 years ending in 2006, budget authority in this function decreased at an annual average rate of 7.8 percent, to $68.54 billion. During the same time period, outlays rose in 2006, indicating an increase in receipts. Similarly, the increasing receipts are reflected as a decline in outlays in the same period by an average of 7.8 percent per year, to $68.54 billion. Off-budget receipts have increased an average of 7.6 percent per year, reaching $11.4 billion in 2006 (as reflected in negative spending).
SUMMARY OF COMMITTEE-REPORTED RESOLUTION
The resolution calls for -$80.80 billion in budget authority and -$81.64 billion in outlays in fiscal year 2007 (with the minus signs again indicating receipts into the Treasury.) The function totals are -$417.41 billion in budget authority and -$417.42 billion in outlays over 5 years. The resolution levels include the effects of fiscal year 2006 supplementals. The levels also reflect the effects of the House-passed supplementals for fiscal year 2006.
MANDATORY SPENDING
The committees with jurisdiction over programs in this function are Energy and Commerce, Resources and Government Reform. The receipts levels for Undistributed Offsetting Receipts (Function 950) are based on the Congressional Budget Office's revised baseline spending projections under current law and policies.
SUMMARY AND REVENUE TABLES
The tables in this section provide information about the levels assumed for revenues, the budgetary aggregates and functional distribution. For spending, these levels are shown for both budget authority and outlays. The tables also provide comparisons of the levels and budgetary aggregates both with the budget request submitted by the President and with the current year to facilitate analysis of the resolution against common benchmarks for federal revenues and spending.
- Table 3: Comparison of Total Revenues for President's Request and Committee Recommendation
- Table 4: Comparison of On-Budget Revenues for President's Request and Committee Recommendation
- Table 5: Tax Expenditure Estimates by Budget Function, Fiscal Years 2006-2010
- Table 6: Fiscal Year 2007 Budget Resolution Total Spending and Revenues
- Table 7: Fiscal Year 2007 Budget Resolution Discretionary Spending
- Table 8: Fiscal Year 2007 Budget Resolution Mandatory Spending
- Table 9: Fiscal Year 2007 Budget Resolution Minus the President's Request
- Table 10: Fiscal Year 2007 Budget Resolution Compared to 2006: Total Spending and Revenues
- Table 11: Fiscal Year 2007 Budget Resolution Compared to 2006: Total Spending and Revenues (Percentage Change)
TABLE 3- COMPARISON OF TOTAL REVENUES FOR PRESIDENT'S REQUEST AND COMMITTEE RECOMMENDATION
[In billions of dollars]
--------------------------------------------
Amount
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Fiscal Year 2006:
President's Request (February 2006) 2,304.0
Committee Level 2,303.1
Fiscal Year 2007:
President's Request (February 2006) 2,431.2
Committee Level 2,422.4
Fiscal Year 2008:
President's Request (February 2006) 2,584.6
Committee Level 2,590.0
Fiscal Year 2009:
President's Request (February 2006) 2,712.1
Committee Level 2,722.7
Fiscal Year 2010:
President's Request (February 2006) 2,851.8
Committee Level 2,869.0
Fiscal Year 2011:
President's Request (February 2006) 2,963.7
Committee Level 2,993.5
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TABLE 4- COMPARISON OF ON BUDGET REVENUES FOR PRESIDENT'S REQUEST AND COMMITTEE RECOMMENDATION
[In billions of dollars]
--------------------------------------------
Amount
--------------------------------------------
Fiscal Year 2006:
President's Request (February 2006) 1,695.6
Committee Level 1,694.7
Fiscal Year 2007:
President's Request (February 2006) 1,789.4
Committee Level 1,780.7
Fiscal Year 2008:
President's Request (February 2006) 1,908.2
Committee Level 1,913.6
Fiscal Year 2009:
President's Request (February 2006) 2,000.4
Committee Level 2,011.2
Fiscal Year 2010:
President's Request (February 2006) 2,104.5
Committee Level 2,122.2
Fiscal Year 2011:
President's Request (February 2006) 2,181.7
Committee Level 2,212.3
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TABLE 5- TAX EXPENDITURE ESTIMATES BY BUDGET FUNCTION, FISCAL YEARS 2006-2010
[Billions of dollars]
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Function Corporations Individuals Total 2006-10
2006 2007 2008 2009 2010 2006 2007 2008 2009 2010
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
National Defense
Exclusion of benefits and allowances to Armed Forces personnel 2.8 2.8 2.9 3.0 3.0 14.5
Exclusion of military disability benefits 0.1 0.1 0.1 0.1 0.1 0.4
Deduction for overnight-travel expenses of National Guard and Reserve Members 0.1 0.1 0.1 0.1 0.1 0.3
International Affairs
Exclusion of income earned abroad by U.S. citizens 3.8 4.0 4.2 4.4 4.6 21.0
Exclusion of certain allowances for Federal employees abroad 0.6 0.6 0.7 0.7 0.8 3.4
Exclusion of extraterritorial income 3.9 1.9 0.1 0.1 0.1 0.1 ( 1 ) ( 1 ) ( 1 ) ( 1 ) 6.2
Deferral of active income of controlled foreign corporations 3.4 5.8 6.4 7.0 7.5 30.1
Inventory property sales source rule exception 6.2 6.4 6.6 6.8 7.0 33.0
Deferral of certain active financing income 1.1 1.7 2.8
General Science, Space, and Technology
Expensing of research and experimental expenditures 2.0 3.7 5.5 6.0 5.8 ( 1 ) 0.1 0.1 0.1 0.1 29.4
Energy
Expensing of exploration and development costs:
Oil and gas 1.1 1.6 1.2 0.8 0.6 ( 1 ) ( 1 ) ( 1 ) ( 1 ) ( 1 ) 5.4
Other fuels ( 1 ) ( 1 ) ( 1 ) ( 1 ) ( 1 ) ( 1 ) ( 1 ) ( 1 ) ( 1 ) ( 1 ) 0.2
Excess of percentage over cost depletion:
Oil and gas 1.0 1.0 0.9 0.9 0.9 ( 1 ) ( 1 ) ( 1 ) ( 1 ) ( 1 ) 4.7
Other fuels 0.1 0.1 0.1 0.1 0.1 ( 1 ) ( 1 ) ( 1 ) ( 1 ) ( 1 ) 0.6
Incentives for small refiners to comply with EPA sulfur regulations ( 1 ) ( 1 ) ( 1 ) ( 1 ) ( 1 ) 0.1
Tax credit for production of non-conventional fuels 2.7 3.2 1.2 ( 1 ) ( 1 ) 1.0 1.0 0.2 ( 1 ) ( 1 ) 8.8
Tax credits for alcohol fuels 2 ( 1 ) ( 1 ) ( 1 ) ( 1 ) ( 1 ) 0.2
Tax credits for biodiesel fuels ( 1 ) 0.1 0.1 ( 1 ) 0.2
Exclusion of interest on State and local government qualified private activity bonds for energy production facilities ( 1 ) ( 1 ) ( 1 ) ( 1 ) ( 1 ) 0.1 0.1 0.1 0.1 0.1 0.5
Exclusion of energy conservation subsidies provided by public utilities ( 1 ) ( 1 ) ( 1 ) ( 1 ) ( 1 ) 0.1
Energy credit (Section 48)