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Total outlays for 2001 are now estimated to be $1,854.9 billion, $1.3 billion below the April Budget estimate. The reduction is the net effect of the Supplemental Appropriations Act, inaction on the Administration's Immediate Helping Hand prescription drug program, enactment of relief for farmers, and revised economic and technical assumptions. For 2002, the estimate of total outlays has increased by $1.5 billion relative to April to $1,962.1 billion. Increases related to the Administration's assessment of immediate defense needs and enactment of the Economic Growth and Tax Relief Reconciliation Act are partially offset by reductions resulting from economic and technical factors.
For the 10-year period 2002 through 2011, the Administration now estimates total outlays at $393.4 billion higher than in April. Enacted legislation and revisions to Administration policies increase the 10-year projections by $412.9 billion. Changes due to revised economic and technical assumptions, on net, reduce outlays by $19.5 billion for the period.
In total, policy changes increase total outlays by $8.2 billion and $8.4 billion for 2001 and 2002, respectively. Over 10 years, outlay changes resulting from policy differences total $412.9 billion.
The Supplemental Appropriations Act increased 2001 outlays by $4.9 billion, largely for additional needs of the Department of Defense. The Agricultural Economic Assistance Act, which provided relief for farmers affected by continuing low prices for farm products, increases outlays for 2001 by $5.5 billion. The Economic Growth and Tax Relief Reconciliation Act included provisions that increased the refundable portion of the earned income and child tax credits beyond what was proposed in the April Budget, raising outlays by $5.0 billion in 2002.
Congressional inaction on the Administration's Immediate Helping Hand prescription drug program reduces outlays by $2.5 billion and $11.2 billion, in 2001 and 2002 respectively. On the other hand, new estimates reflect the President's Framework to Strengthen Medicare, announced on July 12. From 2004–2011, the Administration now proposes to spend $190 billion for Medicare modernization efforts, including a prescription drug benefit. This amount is up $37 billion from the April Budget, and occurs in 8 years rather than ten.
Upon taking office, the Administration discovered that the Defense Department (DOD) had serious unmet needs in several critical areas, such as readiness and health care. As a result, the Administration requested, on top of new funds in the 2001 supplemental, an additional $18.4 billion in funding for 2002, increasing 2002 outlays by $9.5 billion. The longer-term defense review, which will establish funding requirements for future years, is still ongoing. Pending the completion of the defense strategy review, this Review assumes a current services budget for DOD in the outyears based on the proposed 2002 level, an increase in budget authority of $209 billion over the next 10 years.
Revisions in Administration tax policy since the April Budget have changed the composition of the proposed health tax credit, increasing the proportion that will be reflected on the outlay side of the budget. In addition, the effective date of the credit has been delayed. On net, outlays for the credit have increased by $22.5 billion over 10 years as a result of these changes.
Debt service costs associated with policy changes, including the tax rebates in the Economic Growth and Tax Relief Reconciliation Act, increase outlays by $0.9 billion in 2001 and $3.3 billion in 2002.
Revisions in economic assumptions, discussed earlier in this report, reduce outlays by $1.6 billion in 2001 and $6.3 billion in 2002. Over the 10-year period 2002 through 2011, however, outlay estimates increase by a net of $21.8 billion due to revised economic assumptions. Outlays are increased by higher unemployment and inflation rates. Through 2005, these increases are more than offset by lower interest rates that reduce debt service costs. The savings from lower interest rates gradually decreases as the total debt being financed grows smaller. By 2009, lower interest rates increase assumed outlays as earnings on assumed escalating cash balances are reduced.
For 2001, estimated outlays are $1.3 billion lower than in April for technical reasons. For 2002, technical changes increase outlays by $1.5 billion. The following changes in outlay projections all arise from technical factors.
Discretionary programs.—Estimated outlays for discretionary programs have decreased by $2.2 billion and $4.2 billion in 2001 and 2002, respectively, relative to the April Budget, to reflect revisions in expected rates of spending appropriated funds. The Department of Justice expects to spend state and local law enforcement grants more heavily in 2001, shifting spending that was expected in 2002. Training and employment programs are expected to spend more slowly in both 2001 and 2002, while spending more rapidly in 2003 and beyond. In addition, outlays for the highway program have been reduced for 2003 and beyond to reflect lower than expected revenues to the Highway Trust Fund.
Commodity Credit Corporation (CCC) farm programs.—Spending on farm programs through the Commodity Credit Corporation is projected to increase by $2.2 billion in 2002 and $12.5 billion over the 10 years 2002 through 2011, relative to the April Budget. These changes largely reflect increases in projected demand for USDA commodity loans and payments due primarily to increased crop production estimates and slower price recovery for certain commodities. The reduction shown for 2001 is primarily the result of a reduction in the estimated subsidy cost of loans made in previous years, which is reflected here as required by the Credit Reform Act.
Postal service.—Administrative decisions to postpone capital improvements and limit general operating expenses have reduced projections of outlays for the Postal Service by $1.3 billion in 2001. The $0.5 billion reduction in 2002 projected outlays is a result of increased revenues from the July 2001 postage rate increase. Projections for 2003 and beyond continue to assume that the postal fund achieves balance on an accrual basis.
Universal service fund.—The estimate of spending from the universal service fund has declined by $1.1 billion in 2001, reflecting a decrease in expected collections in various programs and a slower rate of spending from obligated balances within the schools and libraries program than had previously been assumed.
Medicaid.—Projected outlay estimates for Medicaid are $1.5 billion above the April estimate for 2001, $0.6 billion for 2002, and $30.0 billion higher for the 10-year period 2002 through 2011 for technical reasons. This is primarily the result of higher projections of state spending on nursing facilities, prescription drugs, managed care, and inpatient facilities, offset in part by administrative actions aimed at improving Medicaid program integrity. Because changes in economic assumptions have lowered Medicaid outlay projections, the net change in Medicaid outlays over the 10-year period is $25.4 billion.
Medicare.—Technical revisions reduce current estimates of Medicare outlays by $1.8 billion in both 2001 and 2002 relative to the April estimate. Medicare outlays are projected to be $29.4 billion lower over the 10-year period, 2002 through 2011 due to technical factors. About half of this decrease is driven by reductions in estimates for physician fee schedule expenditures, reflecting lower actual outlays for the year to date, lower estimates for certain new preventive services mandated by last year's Benefits Improvement and Protection Act, and a lower performance adjustment for 2002. The remaining decrease reflects reductions in outpatient hospital, home health, and managed care payments offset slightly by increases for inpatient hospital, durable medical equipment and lab payments. Including the impact of revised economic assumptions, the total decrease in Medicare current law outlays over the 10-year period is $44.2 billion.
Unemployment compensation.—As a result of revised technical assumptions, outlays for unemployment compensation have increased by $1.7 billion for 2001 and $2.2 billion for 2002 relative to the April estimates. The assumed ratio of the insured unemployment rate to the total unemployment rate has increased thereby increasing the projected number of people eligible for benefits at each level of total unemployment. Average weekly benefits are also assumed to be greater than projected in April.
Temporary Assistance for Needy Families (TANF).—Technical revisions have increased projections of TANF outlays by $1.3 billion in 2001 and $1.1 billion in 2002. This increase is due to states spending for the year to date at a higher rate than previously estimated.
Social Security.—Estimated outlays for Social Security are lower than the April Budget by $0.4 billion in 2001, $1.3 billion in 2002, and $44.5 billion over 10 years as the result of technical factors. The reduction is primarily the result of updated demographic projections contained in the 2001 Trustees Report and additional actual experience through March 2001. The downward technical reestimates are partially offset by upward reestimates for cost-of-living increases and other economic factors so that the net change in the program over 10 years is a decrease of $25.5 billion.
Spectrum auction receipts.—Receipts from the auction of electromagnetic spectrum, which are recorded as offsets to spending in the budget, are projected to be $1.2 billion lower in 2002 and $1.0 billion higher in 2004 than in April. This reflects regulatory action taken by the Federal Communications Commission, which shifts the expected receipts from two major auctions.
Net interest.—Estimates of net interest outlays are $27.2 billion higher than in April over the 10-year period 2002 through 2011, primarily reflecting increased debt service costs related to technical changes in receipts and outlays. The Mid-Session estimates assume that the Treasury will buy back securities in face value amounts of $35 billion in 2001 and $40 billion in 2002. The Budget assumed $35 billion for 2001 and had no buybacks for 2002.
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| 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2002–2006 | 2002–2011 | |
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| April estimate | 1,856.2 | 1,960.6 | 2,016.2 | 2,076.7 | 2,168.7 | 2,223.9 | 10,446.2 | 22,937.5 |
| Change due to: | ||||||||
| Policy: | ||||||||
| Defense review | 0.0 | 9.5 | 13.3 | 23.3 | 18.8 | 22.1 | 87.0 | 196.5 |
| Supplemental | 4.9 | 1.5 | 0.3 | 0.1 | 0.1 | * | 1.9 | 1.9 |
| Farm assistance | 5.5 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Earned income and child tax credits | 0.0 | 5.0 | 6.3 | 5.7 | 5.3 | 7.6 | 29.9 | 72.5 |
| Health tax credit | 0.0 | -0.1 | -1.9 | -0.8 | 2.2 | 3.5 | 2.9 | 22.5 |
| Medicare modernization 1 | -2.5 | -11.2 | -12.9 | -0.8 | 7.5 | 8.2 | -9.2 | 37.0 |
| Other | -0.6 | 0.4 | -0.6 | -0.6 | -0.4 | -0.3 | -1.5 | -2.0 |
| Debt service | 0.9 | 3.3 | 4.5 | 6.0 | 7.4 | 8.5 | 29.7 | 84.4 |
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| Subtotal, policy | 8.2 | 8.4 | 8.9 | 32.9 | 40.9 | 49.6 | 140.7 | 412.9 |
| Economic assumptions: | ||||||||
| Social Security | 0.3 | 2.3 | 3.0 | 2.4 | 2.1 | 1.5 | 11.2 | 19.0 |
| Medicare | * | -0.3 | -0.5 | -0.4 | -0.3 | -0.6 | -2.0 | -14.8 |
| Other mandatory programs | 0.8 | 2.2 | 3.0 | 3.1 | 2.9 | 2.8 | 14.0 | 16.9 |
| Net interest: | ||||||||
| Effect of rates and CPI | -3.0 | -11.7 | -10.6 | -9.1 | -6.8 | -4.4 | -42.5 | -30.9 |
| Debt service | 0.2 | 1.2 | 2.0 | 2.0 | 1.7 | 1.7 | 8.6 | 31.5 |
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| Subtotal, economics | -1.6 | -6.3 | -3.1 | -2.0 | -0.4 | 1.2 | -10.7 | 21.8 |
| Technical reestimates: | ||||||||
| Discretionary programs: | ||||||||
| Highways | 0.0 | 0.0 | -1.7 | -4.4 | -5.6 | -6.0 | -17.7 | -52.4 |
| State and local law enforcement assistance | 0.8 | -0.9 | 0.0 | * | 0.0 | 0.0 | -0.8 | -0.8 |
| Training and employment services | -0.8 | -1.0 | 0.4 | 0.6 | 0.1 | 0.1 | 0.1 | 0.6 |
| Other | -2.2 | -2.4 | -0.7 | 1.6 | 0.6 | 0.2 | -0.7 | -2.0 |
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| Total, discretionary programs | -2.2 | -4.2 | -2.1 | -2.2 | -4.9 | -5.7 | -19.1 | -54.6 |
| Commodity Credit Corporation | -2.4 | 2.2 | 2.1 | 2.6 | 1.9 | 1.0 | 9.8 | 12.5 |
| Postal service | -1.3 | -0.5 | 0.4 | 0.5 | 0.5 | 0.6 | 1.6 | 5.1 |
| Universal service fund | -1.1 | 0.6 | 0.1 | 0.6 | 0.2 | 0.2 | 1.7 | 3.1 |
| Medicaid | 1.5 | 0.6 | 2.2 | 2.5 | 2.7 | 2.8 | 10.8 | 30.0 |
| Medicare | -1.8 | -1.8 | -2.4 | -3.7 | -3.1 | -2.4 | -13.4 | -29.4 |
| Unemployment compensation | 1.7 | 2.2 | 1.1 | 0.7 | 0.6 | 0.6 | 5.1 | 8.3 |
| TANF | 1.3 | 1.1 | 1.0 | 0.7 | 0.5 | * | 3.5 | -1.0 |
| Social Security | -0.4 | -1.3 | -2.1 | -2.8 | -3.5 | -4.2 | -13.9 | -44.5 |
| Spectrum auction receipts | 0.4 | 1.2 | 0.0 | -1.0 | 0.0 | 0.0 | 0.2 | 0.2 |
| Other mandatory programs | -3.0 | -0.2 | * | 0.9 | 0.1 | -* | 0.8 | 1.8 |
| Net interest | -0.4 | -0.4 | 3.0 | 4.4 | 4.0 | 4.1 | 15.1 | 27.2 |
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| Subtotal, technical | -7.8 | -0.6 | 3.4 | 3.1 | -0.9 | -3.0 | 2.0 | -41.3 |
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| Total, changes | -1.3 | 1.5 | 9.2 | 34.0 | 39.6 | 47.7 | 132.0 | 393.4 |
| Current estimate | 1,854.9 | 1,962.1 | 2,025.4 | 2,110.7 | 2,208.3 | 2,271.6 | 10,578.2 | 23,330.9 |
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| * $50 million or less. 1 The President proposed to add $153 billion over 10 years in the April Budget for Medicare modernization. This table displays a $37 billion increase to the April Budget. In total the Mid-Session Review proposes to increase spending for Medicare modernization by $190 billion. |
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