CBO

CONGRESSIONAL BUDGET OFFICE

SECOND AND D STREETS, S.W.

WASHINGTON, D.C. 20515

A

REPORT

The Treatment of Federal Receipts and 

Expenditures in the 

National Income and Product Accounts

September 2008
Pub. No. 3078
The Congress of the United States O Congressional Budget Office

A

REPORT

CBO

The Treatment of Federal Receipts and 

Expenditures in the National Income and 

Product Accounts

September 2008
Note

Numbers in the tables may not sum to totals because of rounding.
Preface

This report describes how the treatment of federal receipts and expenditures in the 

national income and product accounts differs from the recording of federal revenues and 

outlays in the federal budget, as prepared by the Office of Management and Budget. It is one 

of a series of reports that the Congressional Budget Office (CBO) issues each year to fulfill 

section 202(e) of the Congressional Budget Act of 1974, which requires CBO to submit to 

the Committees on the Budget periodic reports about fiscal policy and to provide baseline 

projections of the federal budget. Most recently, in response to that requirement, CBO issued 

The Budget and Economic Outlook: An Update (August 2008).

Frank Russek of CBO’s Macroeconomic Analysis Division and Barry Blom of CBO’s Budget 

Analysis Division wrote the report under the supervision of Robert Dennis and Peter 

Fontaine. Loretta Lettner edited the report, and Maureen Costantino prepared it for publication. Lenny Skutnik printed copies of the report, Linda Schimmel handled the print distribution, and Simone Thomas prepared the electronic version for CBO’s Web site (www.cbo.gov).

Peter R. Orszag

Director

September 2008

Contents

Conceptual Differences Between the Federal Budget and the Federal 

Sector in the NIPAs 1

Differences in Recording Major Transactions 2

The Measurement of National Saving 2

Capital Transfers and Exchanges of Existing Assets 3

Credit Programs 6

Geographic Coverage 6

Universal Service Fund 6

Interest Receipts 6

Surpluses of Government Enterprises 6

Military Sales and Assistance In-Kind 6

Timing Differences 7

Business Activities 8

Presentation of the Federal Government’s Receipts and Expenditures in the NIPAs 8

Tables

1. Relationship of the Budget to the Federal Sector of the National Income and 

Product Accounts 4

2. Baseline Receipts and Expenditures as Measured by the National Income and 

Product Accounts 9

The Treatment of Federal Receipts and 

Expenditures in the 

National Income and Product Accounts

The fiscal transactions of the federal government are 

recorded in two major sets of accounts that conceptually 

are quite different. The framework generally used by 

executive branch agencies and the Congress, and typically 

discussed in the press, is the one presented in the Budget 

of the United States Government, which is prepared by the 

Office of Management and Budget. The budget focuses 

on cash flows—revenues (funds generated by collecting 

taxes and imposing certain fees) and outlays (cash disbursed for the various federal functions). The objectives 

of the budget are to provide information that can assist 

lawmakers in their policy deliberations, facilitate the 

management and control of federal activities, and help 

the Treasury manage its cash balances and determine its 

borrowing needs. 

The national income and product accounts (NIPAs) also 

record the federal government’s fiscal transactions, but as 

an accounting device, they have different objectives. Produced by the Bureau of Economic Analysis (BEA), an 

agency within the Department of Commerce, the NIPAs 

are intended to provide a comprehensive measure of 

activity in the U.S. economy—specifically, current production (the process by which goods and services are provided for consumption) and the income generated by 

that production.1 A well-known measure of production 

in the NIPAs is gross domestic product (GDP). The 

accounts, which are used extensively in macroeconomic 

analysis, divide the economy into four major sectors—

business, government, household, and the “rest of the 

world” (the foreign sector)—each with its own set of 

accounts.2

 The federal sector, which is the focus of this 

report, is one component of the government sector (the 

state and local sector is the other component).3

 Because 

the aims of the NIPAs differ from those of the federal 

budget, the two accounting systems treat some government transactions very differently. 

Conceptual Differences Between the 

Federal Budget and the Federal 

Sector in the NIPAs 

The budget of the federal government is best understood 

as an information and management tool. It focuses primarily on cash flows, recording the inflow of revenues 

and the outflow of spending over a given period. The 

period of foremost interest in the budget is the federal 

fiscal year, which runs from October 1 through September 30. A few exceptions to the general rule of recording 

transactions on a cash basis exist, but they are designed to 

improve the usefulness of the budget as a decisionmaking 

tool. For example, when the federal government makes 

direct loans or provides loan guarantees (as with student 

1. The discussion of the national income and product accounts in 

this report generally refers to Table 3.2 in the accounts, “Federal 

Government Current Receipts and Expenditures,” which most 

closely resembles the presentation in the budget. For other discussions of the NIPAs, see Department of Commerce, Bureau of 

Economic Analysis, “NIPA Translation of the Fiscal Year 2009 

Federal Budget,” Survey of Current Business (March 2008); and 

Budget of the United States Government, Fiscal Year 2009: Analytical Perspectives.

2. Some accounts in the NIPAs, such as the domestic capital account 

(which shows saving and investment), focus on components of 

gross domestic product or income rather than on a specific sector, 

and they bring together relevant information from all four sectors.

3. More formally, BEA regards the federal government and state and 

local governments as subsectors. The treatment of state and local 

governments’ transactions in the NIPAs closely resembles that of 

the federal government’s transactions.
2 THE TREATMENT OF FEDERAL RECEIPTS AND EXPENDITURES IN THE NATIONAL INCOME AND PRODUCT ACCOUNTS

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loans), tracking cash flows gives a misleading view of current costs; therefore, under what is termed credit reform, 

the budget records the estimated subsidy costs at the time 

the loans are made.

The federal sector of the NIPAs reflects none of the planning and management goals that underlie the budget. 

Instead, it illustrates how the federal government fits into 

a general economic framework, detailing current production and income over specific periods, the major sources 

of that production, and recipients of income resulting 

from output. The time increments considered in the 

NIPAs are primarily calendar years and calendar quarters, 

although approximate totals for fiscal years can be derived 

from the quarterly estimates. (The tables in this Web document show fiscal year numbers.)

From the perspective of the NIPAs, the federal government is both a producer and a consumer. Its workforce 

uses purchased goods and services and governmentowned capital (buildings, equipment, and software) to 

produce services for the public at large; because those services are consumed by the public, that consumption, by 

convention, is regarded as a federal expenditure in the 

NIPAs. In addition, through its taxes and transfers, the 

federal government affects the resources available to the 

private sector. The purpose of the NIPAs is to record all 

of those activities consistently. 

The federal sector of the NIPAs tracks how much the 

government spends on the consumption of goods and 

services, and it records the transfer of resources that 

occurs through taxation, payments to the beneficiaries of 

federal programs, and federal interest payments. The federal sector’s contribution to GDP is presented elsewhere 

in the NIPAs (Table 1.1.5 in the accounts).

Differences in Recording Major 

Transactions

The conceptual differences that distinguish the NIPAs 

from the federal budget lead to accounting differences as 

well. In attempting to properly incorporate federal transactions into the framework used to determine GDP, the 

NIPAs reflect judgments about how to best treat transactions such as government investment, the sale and purchase of existing assets, federal credit, and federal activities that resemble those of businesses, as well as 

transactions involving U.S. territories. In some cases, the 

appropriate treatment may be to move a transaction from 

the federal sector to another section of the NIPAs or to 

exclude the transaction from the NIPAs entirely. In other 

cases, the appropriate treatment may involve recording as 

a receipt in the NIPAs an item that the federal budget 

reports as an offsetting (negative) budget outlay or adjusting the timing of a federal transaction to better match the 

timing of related production or income flow.4

The Measurement of National Saving

Several conventions used in the NIPAs are intended to 

show the federal government’s contribution to national 

saving—specifically, net federal government saving (current receipts minus current expenditures). Two major 

departures from the federal budget are the treatment of 

spending for federal investment (for things such as ships, 

computers, and office buildings) and the treatment of 

spending for federal employees’ retirement programs. As 

a result, the concept of net federal saving in the NIPAs is 

akin to, but not the same as, the federal budget surplus. 

Federal Investment. In the federal budget, outlays for 

investment are treated like other cash outlays; thus, to 

determine the size of the federal deficit or surplus, they 

are subtracted from budget revenues. By contrast, in the 

NIPAs, federal investment is not counted as a current 

expenditure (and therefore does not affect net federal 

government saving) because new purchases of federal capital (investments) do not measure the current capital 

inputs used to produce government services.5 To approximate the cost of those capital inputs, the NIPAs include 

in current federal expenditures an estimate of the depreciation (consumption of fixed capital) of the stock of federal capital. The treatment is conceptually similar to that 

applied to the corporate business sector, which uses 

depreciation rather than investment purchases to compute net corporate saving (retained earnings). In the 

federal budget, depreciation is not tracked. Table 1, 

which provides a crosswalk between CBO’s most recent 

4. The resulting differences between the numbers reported in the 

NIPAs and the budget are sometimes divided into three groups: 

coverage, timing, and netting. Although all three types of differences can affect total revenues or outlays, netting differences have 

no effect on the federal deficit or surplus because they affect revenues and outlays equally.

5. Federal investment, along with private investment spending, is 

shown in the NIPAs in the domestic capital account, which displays saving and investment (Table 5.1 in the accounts; see also 

Table 3.9.5, which shows both federal investment and 

consumption). 
THE TREATMENT OF FEDERAL RECEIPTS AND EXPENDITURES IN THE NATIONAL INCOME AND PRODUCT ACCOUNTS 3

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baseline budget projections and the NIPAs, shows that 

difference in coverage in the row labeled “Treatment of 

Investment and Depreciation.”6

Federal Retirement. Transactions involving federal 

employees’ retirement programs are also handled differently in the budget and in the NIPAs. In the budget, federal employees’ contributions to their retirement accounts 

are recorded as revenues; agencies’ contributions on 

behalf of their employees (as well as interest payments 

from the Treasury to trust funds) have no overall budgetary effect because they simply represent transfers of funds 

between two government accounts.7

 Benefit payments to 

federal retirees are recorded as outlays in the budget. By 

contrast, in the NIPAs, the aim is to make the measurement of saving by the federal government consistent with 

that of the private sector. Therefore, the NIPAs treat 

some of the transactions related to federal retirement 

plans as part of the household sector.8

 The receipts from 

federal employers’ retirement contributions (and the 

interest earned by retirement accounts) are considered 

part of workers’ personal income and thus are not 

recorded as federal transactions (receipts or negative 

expenditures). Employees’ contributions are not recorded 

as income in either the federal or the household sector 

but are considered transfers within the household sector.

On the outlay side, pension benefit payments to retirees 

are not recorded as federal expenditures in the NIPAs 

because they are treated as transfers from pension funds 

within the household sector. Some transactions, however, 

are treated as part of federal expenditures even though the 

corresponding receipts are recorded in the household sector. The government’s contributions to its workers’ retirement accounts are counted as federal expenditures (as 

part of employees’ compensation), as is the interest paid 

to federal retirement accounts.9 The different treatment 

of retirement contributions by federal employees is 

shown in the top section of Table 1 under the column 

heading “Receipts”; the different treatment of federal 

employers’ contributions, interest earnings, and benefit 

payments is shown below that, under “Expenditures.” 

Capital Transfers and Exchanges of Existing Assets

Transactions that involve existing assets do not affect the 

way current production and income are measured in the 

NIPAs. Therefore, the NIPAs do not count capital transfers or asset exchanges as part of current federal receipts 

or expenditures, although the budget generally does 

include those transactions. The NIPAs define as capital 

transfers—and thus exclude—estate and gift taxes (which 

are taxes on private-capital transfers) and investment 

grants to state and local governments (for air transportation, highways, transit, and water treatment plants).10

Exchanges of existing assets include federal transactions 

for deposit insurance and the sale and purchase of government assets (including assets that are not “produced,” 

such as land and licenses to use the radio spectrum). 

Those differences between the NIPAs’ federal sector and 

6. The estimates and the presentation of the reconciliation between 

the budget and the NIPAs in Table 1 are based on CBO’s interpretation of the methodology used for the accounts, as detailed in 

Department of Commerce, Bureau of Economic Analysis, Survey 

of Current Business (June 2003), and in BEA’s reconciliation of the 

Administration’s budget for fiscal year 2009 and the accounts, as 

published in the Survey of Current Business (March 2008).

7. In the budget, contributions by an agency to its employees’ retirement accounts are considered outlays for that agency and offsetting receipts (negative outlays) elsewhere within the budget. Thus, 

those intragovernmental transfers result in no net outlays or 

receipts for the total budget. That treatment is the same as the 

treatment of the federal government’s contributions for Social 

Security and Medicare for its employees.

8. Transactions of the National Railroad Retirement Investment 

Trust are part of the federal sector in the NIPAs. In addition, 

Social Security contributions and benefit payments for private and 

government employees alike are recorded in the federal sector as 

receipts and expenditures rather than moved to the household 

sector.

9. However, in the future, BEA may consider recording the annual 

lump-sum payments to amortize the unfunded liabilities of the 

military and civilian service retirement funds as a capital transfer 

rather than as employees’ compensation. That treatment would 

reflect the view that such payments are not related to current production; see “Frequently Asked Questions,” Answer ID 480, at 

www.bea.gov.

10. Another type of capital transfer that BEA does not include in the 

NIPAs is an annual lump-sum payment from the Treasury to the 

Department of Defense Medicare-Eligible Retiree Health Care 

Fund—a trust fund that in October 2002 began to pay for benefits received by retired members of the armed forces who are eligible for Medicare and by their dependents. Those payments to the 

trust fund are for accrued but unfunded liabilities for benefits 

attributable to work performed before 2003; BEA excludes those 

payments from federal expenditures because they are not related 

to current production. Those annual payments are made by the 

Treasury and recorded as outlays. However, the Treasury also 

records offsetting receipts (negative outlays) elsewhere within 

the budget. Because those annual payments have no net effect on 

federal spending either in the NIPAs or in the budget, there is no 

corresponding reconciliation item in Table 1.
4 THE TREATMENT OF FEDERAL RECEIPTS AND EXPENDITURES IN THE NATIONAL INCOME AND PRODUCT ACCOUNTS

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Table 1.

Differences Between the Federal Budget and the National Income and Product 

Accounts as Reflected in CBO’s Baseline Projections

(Billions of dollars, by fiscal year)

Continued

Actual

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

2,568 2,548 2,720 2,881 3,178 3,451 3,619 3,770 3,958 4,145 4,341 4,546

-4 -4 -4 -4 -4 -4 -3 -3 -3 -3 -3 -3

-26 -29 -27 -21 -20 -54 -62 -69 -75 -81 -87 -94

-5 -5 -5 -5 -6 -6 -6 -6 -7 -7 -7 -7

-8 -8 -9 -9 -9 -9 -9 -10 -10 -10 -10 -10 ___ ___ ___ ___ ___ ___ ___ ___ ___ ____ ____ ____

-43 -46 -45 -40 -39 -73 -81 -88 -94 -101 -108 -115

50 54 60 60 62 65 70 75 80 85 91 98

Deposit insurance premiums * 1 4 4 5 5 3 * * * * *

Government contributions for 

OASDI and HI for employees 16 17 18 19 20 21 22 23 24 26 27 28

21 23 27 29 30 30 33 33 33 33 32 34

Surpluses of government enterprises -3 -2 -8 -7 -6 -2 -6 -6 -7 -7 -8 -9

31 33 35 36 36 37 38 38 39 40 41 37 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___

116 126 136 141 146 156 160 162 169 176 182 188

Timing shift of corporate estimated

3 0 0 8 3 -17 -4 10 0 0 0 0

-21 -3 9 -3 -4 -1 -2 2 2 3 2 2

___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___

Total Differences 55 77 100 105 107 65 73 87 76 79 77 76

Receipts in the NIPAs 2,624 2,625 2,820 2,987 3,284 3,516 3,692 3,857 4,034 4,223 4,417 4,622

2,729 2,955 3,158 3,312 3,502 3,577 3,766 3,939 4,120 4,352 4,514 4,680

-19 -22 -24 -26 -28 -29 -29 -29 -30 -30 -31 -32

Contributions for government

35 58 50 53 56 59 63 67 72 77 82 88

-50 -52 -54 -57 -59 -60 -62 -63 -64 -65 -66 -66

29 33 -11 6 11 10 9 9 10 10 11 11

-15 -16 -17 -18 -19 -19 -21 -22 -23 -24 -25 -26

Universal Service Fund payments -7 -8 -8 -9 -9 -9 -9 -9 -9 -10 -10 -10 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___

-27 -7 -65 -50 -48 -48 -48 -46 -44 -42 -39 -36

Universal Service Fund receipts

Receipts

Expenditures

Medicare premiums

Income receipts on assets

Subtotal, coverage

Other

Subtotal, netting

tax payments

Geographic adjustments

Revenues (Budget)a

Differences

Coverage

employees' retirement

Contributions for government 

Estate and gift taxes

Netting

Other adjustmentsb

Outlays (Budget)a

Differences

Coverage

Treatment of investment and

depreciation 

employees' retirement

Capital transfers

Lending and financial

adjustments

Geographic adjustments 

Subtotal, coverage
THE TREATMENT OF FEDERAL RECEIPTS AND EXPENDITURES IN THE NATIONAL INCOME AND PRODUCT ACCOUNTS 5

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Table 1. Continued

Differences Between the Federal Budget and the National Income and Product 

Accounts as Reflected in CBO’s Baseline Projections

(Billions of dollars, by fiscal year)

Source: Congressional Budget Office. For details on CBO’s baseline budget projections, see The Budget and Economic Outlook: An Update

(September 2008).

Note: * = between -$500 million and $500 million; OASDI = Old-Age, Survivors, and Disability Insurance; HI = Hospital Insurance.

a. Includes Social Security and the Postal Service.

b. Includes timing differences not shown elsewhere in Table 1, plus discrepencies between figures in the NIPAs and in the budget that may 

diminish when the Bureau of Economic Analysis makes subsequent revisions. The figure for 2007 reflects netting adjustments for hurricane relief and recovery.

c. Includes coverage differences not shown elsewhere above.

d. Net federal saving or dissaving is akin to the federal surplus or deficit in the budget. Negative numbers here indicate dissaving.

Actual

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

50 54 60 60 62 65 70 75 80 85 91 98

Deposit insurance premiums * 1 4 4 5 5 3 * * * * *

Government contributions for 

OASDI and HI for employees 16 17 18 19 20 21 22 23 24 26 27 28

21 23 27 29 30 30 33 33 33 33 32 34

Surpluses of government enterprises -3 -2 -8 -7 -6 -2 -6 -6 -7 -7 -8 -9

31 33 35 36 36 37 38 38 39 40 41 37 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___

116 126 136 141 146 156 160 162 169 176 182 188

8 -2 0 0 -31 30 1 0 0 -43 -4 47

6 -28 -22 -16 -17 -15 -14 -9 -7 -5 -12 -12 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___

Total Differences 103 89 49 74 51 123 99 108 119 87 128 187

2,832 3,045 3,207 3,386 3,553 3,700 3,865 4,047 4,238 4,439 4,643 4,867

-161 -407 -438 -431 -325 -126 -147 -170 -162 -207 -174 -135

Treatment of investment and

19 22 24 26 28 29 29 29 30 30 31 32

-39 -62 -54 -57 -60 -63 -67 -71 -75 -80 -85 -91

-26 -29 -27 -21 -20 -54 -62 -69 -75 -81 -87 -94

50 52 54 57 59 60 62 63 64 65 66 66

-29 -33 11 -6 -11 -10 -9 -9 -10 -10 -11 -11

10 11 12 13 13 14 14 15 16 17 18 19

**** * * * * * * ** ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ____

-16 -39 20 11 9 -25 -33 -42 -50 -59 -69 -79

-6 2 0 8 34 -48 -4 10 0 43 4 -47

-27 25 31 13 13 14 12 11 8 8 14 15

___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ____

Total Differences -48 -12 51 31 56 -58 -26 -21 -42 -9 -52 -111

-208 -420 -387 -400 -269 -184 -172 -190 -204 -216 -225 -245

Expenditures (Continued)

Net Federal Government Saving

Differences (Continued)

Netting

Medicare premiums

Income receipts on assets

Other

Subtotal, netting

Timing adjustments

Other Adjustmentsc

Lending and financial 

adjustments

Expenditures in the NIPAs

Budget Deficita

Differences

Coverage

depreciation

Contributions for government

employees' retirement

Estate and gift taxes

Geographic adjustments

Other adjustmentsb

Net Federal Government Savingd

Universal Service Fund

Subtotal, coverage

Timing adjustments

Capital transfers
6 THE TREATMENT OF FEDERAL RECEIPTS AND EXPENDITURES IN THE NATIONAL INCOME AND PRODUCT ACCOUNTS

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the budget accounts appear as estate and gift taxes on the 

revenue side of Table 1and as capital transfers and lending and financial adjustments on the outlay side. 

Credit Programs

For federal credit programs (loans and loan guarantees), 

only the estimated credit subsidy and administrative costs 

are included in outlays. Cash flows from loan disbursements, repayments, and interest, by contrast, are reported 

in what are termed financing accounts, which have no 

effect on outlays.

As in the budget, the NIPAs record administrative costs 

and generally exclude loan disbursements and repayments 

and other cash flows that are considered exchanges of 

existing assets or financial and lending transactions that 

are unrelated to current production. The NIPAs do not 

record subsidy costs. In another departure from the budget, the NIPAs include the interest receipts from credit 

programs (as part of federal receipts). Those differences in 

the treatment of credit programs are recorded in two 

places in Table 1: Under the heading “Expenditures,” the 

figures in the row labeled “Lending and Financial Adjustments” show the differences in the way loan subsidies are 

handled; under “Receipts,” the difference in the treatment of loan interest is captured as part of “Income 

Receipts on Assets.” 

Geographic Coverage

The NIPAs exclude all government transactions with 

Puerto Rico and other U.S. territories, whose current 

production, as defined in the NIPAs, is not part of the 

nation’s GDP. Because federal transfers dominate those 

transactions, their exclusion tends to increase the NIPAs’ 

depiction of net federal government saving by comparison with the budget’s measure of saving—the federal deficit or surplus. That difference in coverage is shown as 

geographic adjustments in Table 1.

Universal Service Fund 

The business activity of the Universal Service Fund, 

which provides resources to promote access to telecommunications, is recorded in the budget but not in the 

NIPAs’ federal sector. The Universal Service Fund 

receives federally required payments from providers of 

interstate and international telecommunications services 

and disburses those funds to local providers that serve 

high-cost areas, low-income households, libraries, and 

schools, as well as to rural health care providers. The fund 

is administered by the Universal Service Administrative 

Company, an independent nonprofit corporation regulated by the Federal Communications Commission. 

Although the Universal Service Fund’s revenues and outlays appear in the federal budget, they have little net 

effect on the deficit or surplus. In the NIPAs, the fund’s 

receipts and payments are classified as intracorporate 

transfers (from one business to another within the corporate sector). The difference in treatment of the Universal 

Service Fund is so labeled in Table 1.

Interest Receipts

In the NIPAs, federal interest receipts are grouped with 

other types of federal receipts (in the category designated 

“Income Receipts on Assets”) rather than netted against 

federal interest payments as they are in the federal budget.11 BEA’s treatment is consistent with international 

accounting practices, wherein interest receipts and payments are reported separately. The difference in the treatment of interest receipts in the NIPAs and in the federal 

budget raises the NIPAs’ measure of government receipts 

relative to federal budget revenues and increases the 

NIPAs’ measure of federal spending relative to budget 

outlays. However, because the difference in treatment 

affects receipts and expenditures in the NIPAs by exactly 

the same amount, it has no effect on the NIPAs’ measurement of net federal government saving. 

Surpluses of Government Enterprises

In the NIPAs, the surpluses (or deficits) recorded by certain government enterprises, such as the Postal Service, 

are shown on a separate line as current receipts of the federal government. That treatment is in keeping with international accounting standards, which generally advocate 

reporting spending on a gross, rather than a net, basis. By 

contrast, surpluses of government enterprises are treated 

as offsetting receipts in the federal budget. 

Military Sales and Assistance In-Kind

Because the NIPAs try to identify contributions to GDP 

by sector, they do not classify as part of federal consumption purchases by the military of equipment and 

services that are intended for sale or as gifts to foreign 

governments. Instead, those transactions are considered 

net exports in the NIPAs’ foreign-transactions account 

(Table 14.1 in the accounts). In the case of gifts, the 

11. About half of the NIPAs’ interest receipts, derived mainly from 

penalties on late tax payments, are recorded as revenues in the federal budget.
THE TREATMENT OF FEDERAL RECEIPTS AND EXPENDITURES IN THE NATIONAL INCOME AND PRODUCT ACCOUNTS 7

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transactions also are recorded in the federal sector of the 

NIPAs as a portion of transfers to the rest of the world—

a classification that parallels their treatment in the federal 

budget, where they are categorized as outlays. By contrast, even though the cost of acquiring military equipment that is then sold to foreign governments is recorded 

in the federal budget as outlays, the proceeds from those 

sales are recorded as offsetting receipts. 

Timing Differences 

As much as is possible, the NIPAs attempt to measure 

income flows when income is earned (on an accrual basis) 

rather than when income is received (on a cash basis).12

For example, BEA attributes corporate tax payments to 

the year in which the liabilities are incurred rather than to 

the time when the payments are actually made. That 

approach makes sense in an integrated system of accounts 

that tracks both production and income because on an 

accrual basis—measurement problems aside—the value 

of what is produced in a given period should match the 

total income generated. However, the NIPAs are not 

entirely consistent in that respect: Personal tax payments 

are counted as they are made and are not attributed retroactively to the year in which the liabilities were incurred. 

Because the budget is recorded mostly on a cash basis and 

the NIPAs’ federal sector is recorded largely on an accrual 

basis, the timing of recorded transactions differs in several 

areas. 

Corporate Taxes. Legislation sometimes temporarily 

shifts the timing of corporate tax payments (usually from 

the end of one fiscal year to the beginning of the next, or 

vice versa). The NIPAs exclude such timing shifts, which 

are not consistent with accrual accounting. Timing 

adjustments for the net effects of enacted legislation are 

shown in Table 1 under the heading “Receipts” in the 

row labeled “Timing Shift of Corporate Estimated Tax 

Payments.” 

Although corporations make estimated tax payments 

throughout the year, any shortfalls (or overpayments) are 

corrected in the form of final payments (or refunds) in 

subsequent years. Whereas the federal budget records 

those final payments on a cash basis, the NIPAs shift 

them back to the year in which the corporate profits that 

gave rise to the tax liabilities were actually generated. The 

results of that difference are difficult to identify for recent 

history and thus appear under the heading “Receipts” in 

Table 1 in the “Other Adjustments” category.13

Personal Taxes. Although personal taxes are not recorded 

on an accrual basis in the NIPAs, BEA nevertheless 

attempts to avoid large, distorting upward or downward 

spikes in personal disposable income that result from timing quirks. Such quirks occur each year in April, for 

example, when most final settlements for the previous 

year’s personal taxes are paid. In the NIPAs, therefore, 

those settlements are evenly spread over the four quarters 

of the calendar year in which they are paid. (As with 

accrual accounting, that treatment avoids spikes. Unlike 

accrual accounting, however, it does not move payments 

back to the year in which the liabilities were incurred.) 

Such “smoothing” can alter the relationship of the NIPAs 

and the budget accounts for various fiscal years because it 

shifts some receipts into the last quarter of the calendar 

year and thus into the following fiscal year.14

Again, those adjustments are difficult to identify for 

recent history and thus are not shown separately in 

Table 1. They appear instead under “Receipts” in the row 

labeled “Other Adjustments.” 

Transfers and Military Compensation. Timing adjustments are needed on the spending side of the NIPAs to 

align military compensation and government transfer 

payments—for example, veterans’ benefits, Supplemental 

Security Income (SSI) payments, and Medicare’s payments to providers—with income that is reported on an 

accrual basis in the NIPAs. Misalignments can occur 

because of accelerations in the timing of payments that 

result from quirks in the calendar (holidays and weekends 

12. See United Nations, System of National Accounts (1993), paragraph 3.19, which emphasizes reporting transactions on an 

accrual basis. Many of the conceptual changes to the NIPAs have 

been based on guidelines from that U.N. document. See also 

Department of Commerce, Bureau of Economic Analysis, “The 

NIPAs and the System of National Accounts,” Survey of Current 

Business (December 2004), pp. 17–32.

13. Other adjustments” include timing differences not shown elsewhere in Table 1, plus discrepancies between figures in the NIPAs 

and the budget that may diminish when BEA makes subsequent 

revisions.

14. A change in the relationship between receipts in the budget and in 

the NIPAs is projected to occur after certain changes in tax laws, 

such as the changes scheduled to take effect in 2011. CBO’s baseline for revenues incorporates the assumption that those changes 

do, indeed, occur. 
8 THE TREATMENT OF FEDERAL RECEIPTS AND EXPENDITURES IN THE NATIONAL INCOME AND PRODUCT ACCOUNTS

CBO

or leap years) or because of legislation designed to delay 

payments. 

SSI payments and veterans’ benefits are usually disbursed 

on the first day of each month, but if the first of the 

month falls on a weekend or holiday, payments are made 

a day or more in advance. If that occurs for the October 

benefits, payments are pushed into the previous fiscal 

year in the budget. In such cases, the NIPAs introduce a 

timing adjustment that effectively moves the payments 

back to the first day of the month. Hence, the NIPAs’ 

adjustment always ensures that there are exactly 12 

monthly SSI payments in a year, whereas in the budget, 

there may be 11 in some years and 13 in others.

For military compensation, which is normally paid at the 

beginning and middle of each month but may sometimes, like SSI, be paid early to avoid weekends, the 

adjustment in the NIPAs always ensures 24 payments in a 

year. In the budget, by contrast, there may be 23 

payments in some years and 25 in others. Under the 

heading “Expenditures” in Table 1, the row labeled “Timing Adjustments” reflects that regularizing for transfers 

and for military pay. 

In another contrast with the federal budget, the NIPAs 

record Medicare payments on an accrual basis rather than 

on a cash basis.15 That treatment better illustrates the 

link between the underlying economic activity (the medical services provided) and the associated federal transactions (payment for those services), which can be several 

months apart. The timing adjustment, however, has only 

a small effect on the NIPA measure of net federal government saving. 

Business Activities 

Both the federal budget and the NIPAs treat certain revenues as offsetting receipts when they result from voluntary transactions with the public that resemble business 

activities, such as proceeds from the sale of government 

publications. However, the NIPAs generally have a 

stricter view of what resembles a business transaction. In 

particular, Medicare premiums, deposit insurance premiums, rents, royalties, and regulatory or inspection fees are 

deemed equivalent to business transactions in the budget 

but not in the NIPAs. Consequently, those transactions 

(negative outlays in the budget) are treated in the NIPAs 

as government receipts (contributions for government 

social insurance and current transfers from business—

such as fines and fees, and taxes on production and 

imports). Those differences are recorded within the category “Netting” in Table 1. Because they affect total current receipts and total current expenditures by exactly the 

same amounts, they have no effect on the NIPAs’ measure of net federal government saving.

Presentation of the Federal 

Government’s Receipts and 

Expenditures in the NIPAs

As in the budget, the federal sector of the NIPAs classifies 

receipts by type, but the categories differ (see Table 2). 

The NIPAs’ classifications help determine measures such 

as disposable income and corporate profits after taxes. 

There are five major categories of current receipts. The 

largest category, current tax receipts, includes taxes on 

personal income, corporate income, and production and 

imports (excise taxes and customs duties), as well as taxes 

from the rest of the world. The next-largest category—

contributions for government social insurance—consists 

of Social Security taxes, Medicare taxes and premiums, 

and unemployment insurance taxes. The remaining categories are current transfer receipts (fines and fees), 

income receipts on assets (interest, rents, and royalties), 

and current surpluses of government enterprises (such as 

the Postal Service).

In the NIPAs, the government’s expenditures are classified according to purpose. The major groups, which are 

fewer than in the federal budget, are consumption expenditures, or spending on goods and services, including the 

costs of capital depreciation (with separate estimates for 

defense and nondefense spending); transfer payments (to 

individuals, state and local governments, and the rest of 

the world); interest payments; and subsidies to businesses 

and government enterprises. 

Consumption of goods and services (for defense and nondefense purposes) consists of spending by the government 

15. Beginning with its July 2008 annual revisions, BEA has changed 

the way it reports Medicare prescription drug benefits. Previously, 

because of data limitations, BEA reported those federal expenditures on a cash basis. Now, newly available data on “incurred benefits” from the Centers for Medicare and Medicaid Services enable 

BEA to show federal expenditures for Medicare prescription drug 

benefits on an accrual basis. That treatment is now consistent with 

that of other Medicare benefits in the federal sector of the NIPAs. 
THE TREATMENT OF FEDERAL RECEIPTS AND EXPENDITURES IN THE NATIONAL INCOME AND PRODUCT ACCOUNTS 9

CBO

Table 2.

CBO’s Baseline Projections of Receipts and Expenditures as Measured in the 

National Income and Product Accounts’ Framework

(Billions of dollars)

Source: Congressional Budget Office

a. Includes Social Security taxes, Medicare taxes and premiums, and unemployment insurance taxes.

b. Includes Social Security and the Postal Service

Actual

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

1,142 1,152 1,269 1,365 1,568 1,712 1,824 1,922 2,026 2,136 2,250 2,372

373 320 344 355 376 389 396 408 420 435 449 464

Taxes on production and imports 98 98 100 102 110 115 119 122 126 131 135 136

Taxes from the rest of the world 15 15 14 15 17 18 19 20 21 23 24 25 ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____

1,627 1,587 1,728 1,837 2,071 2,235 2,359 2,472 2,594 2,724 2,859 2,997

934 968 1,015 1,067 1,127 1,186 1,239 1,291 1,344 1,399 1,457 1,518

37 40 47 50 52 55 55 55 57 60 63 66

29 32 38 40 41 42 45 45 46 47 46 49

Current Surpluses of Government

-3 -2 -8 -7 -6 -2 -6 -6 -7 -7 -8 -9 ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____

2,624 2,625 2,820 2,987 3,284 3,516 3,692 3,857 4,034 4,223 4,417 4,622

Consumption Expenditures (Purchases of Goods and Services)

494 537 594 633 655 673 689 706 723 742 760 780

75 79 81 83 85 87 90 93 95 98 100 102

244 260 276 288 295 302 311 322 331 341 351 360

29 30 30 31 31 31 32 32 33 33 34 34 ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____

842 906 982 1,035 1,065 1,093 1,121 1,153 1,182 1,214 1,245 1,276

1,233 1,358 1,432 1,499 1,566 1,634 1,729 1,835 1,949 2,069 2,190 2,329

444445556 667 ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____

1,237 1,362 1,436 1,503 1,570 1,639 1,734 1,840 1,955 2,075 2,196 2,335

370 387 414 432 451 472 497 524 554 586 620 657

33 37 37 39 41 42 43 43 44 45 46 47 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___

403 424 451 472 492 514 540 568 598 631 666 703

304 305 291 330 378 402 418 437 454 470 486 501

45 48 47 47 48 52 51 49 49 50 50 51 ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____

2,832 3,045 3,207 3,386 3,553 3,700 3,865 4,047 4,238 4,439 4,643 4,867

-208 -420 -387 -400 -269 -184 -172 -190 -204 -216 -225 -245

Total Current Expenditures

Net Federal Government Saving

To the rest of the world

Subtotal

Interest Paymentsb

Subsidies

Subtotal

Other transfer payments 

Grants-in-aid to state and

local governmentsb

Current Transfer Payments

Government social benefits

To persons

To the rest of the world

Nondefenseb

Consumption

Consumption of fixed capital

Subtotal

Consumption

Consumption of fixed capital

Income Receipts on Assets

Enterprises

Total Current Receipts

Taxes on personal income

Net Federal Government Saving

Expenditures

Receipts

Taxes on corporate income

Subtotal

Contributions for Government

Social Insurancea

Current Transfer Receipts

Defense

Current Tax Receipts
10 THE TREATMENT OF FEDERAL RECEIPTS AND EXPENDITURES IN THE NATIONAL INCOME AND PRODUCT ACCOUNTS

CBO

for immediate use in production. (The largest portion of 

such consumption is the compensation of military and 

civilian federal employees.) Among the government’s 

consumption expenditures, the consumption of fixed 

capital—depreciation—represents a partial measure of 

the services the government receives from its stock of 

fixed assets, such as buildings or equipment.

Transfer payments (cash payments made directly to 

individuals and the rest of the world, as well as grants 

to state and local governments or foreign nations) constitute another grouping. Social benefits make up most of 

the transfers to individuals. Grants-in-aid are payments 

the federal government makes to state or local governments, which generally use them for transfers (such as 

benefits provided by the Medicaid program) and consumption (such as the hiring of additional police officers). Current transfers to the rest of the world include 

federal purchases of military equipment for delivery to 

foreign governments. 

The NIPAs’ category for federal interest payments shows 

only payments and thus differs from the budget category 

labeled “Net Interest.” In the NIPAs, federal interest 

receipts are classified with other federal receipts. 

The NIPAs’ category “Subsidies” primarily consists of 

payments by the federal government to businesses, 

including state and local government enterprises, such as 

public housing authorities. Federal housing and agricultural assistance have long dominated that category.

Net federal government saving in the NIPAs is the 

difference between the current receipts and the current 

expenditures of the federal sector.16 It is a component of 

net national saving (which also includes net saving by the 

state and local government sector, personal saving, and 

corporate retained earnings) and, thus, is a partial measure of how much of the nation’s income from current 

production is not consumed in the current period. Net 

federal saving (or “dissaving”) is akin to the federal surplus or deficit measured in the budget. However, net federal government saving is not a good indicator of federal 

borrowing requirements because, unlike the budget deficit or surplus, it is not a measure of cash flows.17

16. Gross federal saving—a component of gross national saving—

equals net federal saving plus depreciation (consumption of fixed 

capital).

17. As an addendum to the NIPAs’ Table 3.2, BEA publishes a measure labeled “Net Lending or Net Borrowing,” which is closer to a 

cash or financial measure in several ways. Like the budget, it 

includes investment purchases as expenditures because those purchases must be financed from current receipts or from federal borrowing. At the same time, it excludes consumption of fixed capital 

because those accounting charges are not a drain on current financial resources. In addition, it includes receipts from the sale of 

existing assets and capital transfer receipts (for example, estate and 

gift taxes) and capital transfer payments (for example, investment 

grants to state and local governments), which are not part of current receipts or expenditures in the NIPAs but do affect cash 

flows. Despite those adjustments, net federal lending or borrowing in the NIPAs differs from the budget deficit or surplus because 

of all of the other differences in timing and coverage that distinguish the NIPAs from the budget. BEA presents those differences 

in Table 3.18, which is similar to the presentation in Table 1.