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

June 2009
Pub. No. 3217
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

June 2009
Notes

Numbers in the text and tables may not add up to totals because of rounding.

Unless otherwise indicated, all years are fiscal years.
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, the agency issued An Analysis of the 

President’s Budgetary Proposals for Fiscal Year 2010 (June 2009).

Frank Russek of CBO’s Macroeconomic Analysis Division and Jared Brewster of CBO’s 

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

Peter Fontaine. Christian Howlett edited the report, and Kate Kelly proofread it. 

Maureen Costantino prepared the report 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).

Douglas W. Elmendorf

Director

June 2009

Contents

CBO

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 7

Surpluses of Government Enterprises 7

Military Sales and Assistance In-Kind 7

Timing Differences 7

Business Activities 9

Presentation of the Federal Government’s Receipts and Expenditures in the NIPAs 9

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 10

CBO

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 from one another. The Budget of the 

United States Government, which is prepared by the 

Office of Management and Budget, is the framework 

generally used by executive branch agencies and the Congress and typically discussed in the press. It focuses on 

cash flows—revenues (funds generated from taxes and 

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 second major set of accounts is the national income 

and product accounts (NIPAs), which are produced by 

the Department of Commerce’s Bureau of Economic 

Analysis (BEA). Like the budget, the NIPAs record the 

federal government’s fiscal transactions, but as an 

accounting device, they have different objectives. The 

NIPAs are intended to provide a comprehensive measure 

of activity in the U.S. economy, and as such, they are 

used extensively in macroeconomic analysis. Specifically, 

they measure current production (the process by which 

goods and services are provided for consumption) and the 

income generated by current production.1 A well-known 

measure of production in the NIPAs is gross domestic 

product (GDP). The accounts 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 This report focuses on the 

federal sector, which is one component of the government sector.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 

main period of interest in the budget is the federal fiscal 

year, which runs from October 1 through September 30. 

Although the budget generally records transactions on a 

cash basis, a few exceptions exist, but they are designed to 

improve the budget’s usefulness as a decisionmaking tool. 

For example, when the federal government makes direct 

loans or provides loan guarantees (as with student loans 

and recent loans to aid some automobile companies), 

tracking cash flows gives a misleading view of true costs. 

Therefore, under what is termed credit reform, the 

1. The discussion of the NIPAs 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 federal budget. For other discussions of the NIPAs, see 

Department of Commerce, Bureau of Economic Analysis, “NIPA 

Translation of the Fiscal Year 2009 Federal Budget” and “A Primer 

on Government Accounts,” 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 GDP or income rather than on a specific sector. Those 

accounts bring together relevant information from all four sectors.

3. The state and local sector is the other component of the government sector. 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 the treatment of the federal government’s transactions.
2 THE TREATMENT OF FEDERAL RECEIPTS AND EXPENDITURES IN THE NATIONAL INCOME AND PRODUCT ACCOUNTS

CBO

budget records the estimated subsidy costs at the time the 

loans are made.

The federal sector in 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 NIPAs primarily deal with calendar 

years and calendar quarters, but approximate totals for 

fiscal years can be derived from the quarterly estimates. 

(The tables in this report 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 in the NIPAs tracks how much the 

government spends on the consumption of goods and 

services. It also 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 programs, 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) outlay or 

adjusting the timing of a federal transaction to better 

match the timing of the related production or income 

flow.4 The differences between the Congressional Budget 

Office’s (CBO’s) most recent baseline budget projections 

and its corresponding estimates for the federal sector in 

the NIPAs are detailed in Table 1.5

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 NIPAs’ 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 (or 

“dissaving”) in the NIPAs is akin to, but not the same as, 

the federal budget surplus (or deficit). 

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. In the NIPAs, 

by contrast, 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.6 To approximate the cost of those capital inputs, the NIPAs include 

4. The resulting differences between the numbers reported in the 

NIPAs and the budget are sometimes divided into three groups: 

coverage differences, timing differences, and netting differences. 

Although all three types can affect total revenues or outlays, netting differences have no impact on the federal deficit or surplus 

because they affect revenues and outlays equally.

5. 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 NIPAs, as detailed in 

Department of Commerce, Bureau of Economic Analysis, Survey 

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

President’s budget for fiscal year 2009 and the NIPAs, as published in the Survey of Current Business (March 2008).

6. 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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in current federal expenditures an estimate of the depreciation (consumption) of the government’s stock of fixed 

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. That difference in coverage is shown in Table 1 under “Expenditures” in the row labeled “Treatment of investment and 

depreciation.”

Federal Retirement. Transactions involving federal 

employees’ retirement programs are also handled differently in the budget than in the NIPAs. Federal employees’ contributions to their retirement accounts are 

recorded in the budget as revenues. However, agencies’ 

contributions on behalf of their employees (as well as 

interest payments from the Treasury to the retirement 

trust funds) have no overall budgetary effect because 

they are simply transfers of funds between two government accounts.7

 When benefits are paid to federal retirees, they are recorded in the budget as outlays. 

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

with the measurement of saving by the private sector. 

Therefore, the NIPAs treat some transactions related to 

federal retirement plans as part of the household sector 

of the economy.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, payments of pension benefits 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. The different treatment of 

retirement contributions by federal employees is shown 

in the top section of Table 1 under “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. From the perspective of the 

NIPAs, capital transfers include estate and gift taxes 

(which are taxes on private-capital transfers) and investment grants to state and local governments for such 

things as air transportation, highways, transit, and water 

treatment plants.9 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). In Table 1, those differences between the 

NIPAs’ federal sector and the budget appear as “Estate 

and gift taxes” under “Receipts” and as “Capital transfers”

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 in 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. Among the exceptions, 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. Another type of capital transfer that is excluded from the NIPAs’ 

measures of current receipts and current expenditures is the 

annual lump-sum payment that the Treasury makes to the 

Department of Defense Medicare-Eligible Retiree Health Care 

Fund. Since October 2002, that trust fund has paid for benefits to 

retired members of the armed forces (and their dependents) who 

are eligible for Medicare. The Treasury’s 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. In the budget, those annual payments by the 

Treasury are recorded as outlays. However, the Treasury also 

records offsetting receipts (negative outlays) elsewhere in the budget. Because those annual payments have no net effect on federal 

spending either in the NIPAs or in the budget, they are not 

included among the reconciliation items in Table 1.
4 THE TREATMENT OF FEDERAL RECEIPTS AND EXPENDITURES IN THE NATIONAL INCOME AND PRODUCT ACCOUNTS

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Table 1.

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

Product Accounts

(Billions of dollars)

Continued

Actual

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

2,524 2,186 2,334 2,783 3,086 3,281 3,436 3,610 3,761 3,927 4,083 4,247

Contributions for government 

-4 -3 -3 -3 -3 -3 -3 -3 -2 -2 -2 -3

-29 -22 -13 -17 -37 -43 -48 -52 -56 -61 -65 -69

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

Universal Service Fund receipts -8 -9 -9 -9 -9 -9 -9 -9 -9 -9 -10 -10 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___

-46 -38 -31 -34 -54 -60 -65 -70 -74 -80 -83 -88

54 57 62 64 69 73 80 83 87 93 99 106

Deposit insurance premiums 1 7 12 15 17 16 7 3 3 3 3 3

Government contributions for 

OASDI and HI for employees 17 18 19 20 21 22 23 25 26 27 28 29

21 19 21 24 25 26 25 25 26 25 26 27

Surpluses of government enterprises -1 -5 -6 -11 -6 -8 -9 -9 -10 -11 -11 -12

32 33 33 33 34 35 36 37 37 38 37 36 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___

126 129 140 146 160 165 163 163 169 175 182 189

Timing shift of corporate estimated

0 0 7 3 -15 -6 12 0 0 0 0 0

3 29 -1 -31 2 -6 6 -2 2 -2 2 -1 ___ ____ ____ ___ ___ ___ ___ ___ ___ ___ ____ ____

Total Differences 82 119 115 83 93 93 116 91 96 93 100 100

Receipts in the NIPAs 2,607 2,305 2,449 2,867 3,179 3,374 3,551 3,700 3,857 4,020 4,183 4,347

2,983 3,853 3,473 3,476 3,417 3,581 3,746 3,892 4,088 4,239 4,408 4,671

-24 -33 -33 -35 -37 -39 -40 -41 -42 -42 -43 -43

Contributions for government

58 24 33 35 38 42 47 53 59 65 72 79

-52 -264 -89 -80 -74 -69 -68 -67 -66 -66 -65 -66

13 -220 -4 -5 9 -4 1 1 0 0 3 0

-15 -19 -20 -20 -20 -21 -21 -22 -23 -24 -25 -26

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

Subtotal, coverage -29 -521 -123 -114 -93 -100 -91 -87 -81 -75 -67 -65

Capital transfers

Lending and financial

adjustments

Geographic adjustments 

Coverage

Treatment of investment and

depreciation 

employees' retirement

Other adjustmentsa

Expenditures

Outlays (Budget)

Differences

Income receipts on assets

Other

Subtotal, netting

tax payments

Geographic adjustments

Subtotal, coverage

Netting

Medicare premiums

Differences

Coverage

employees' retirement

Estate and gift taxes

Receipts

Revenues (Budget)
THE TREATMENT OF FEDERAL RECEIPTS AND EXPENDITURES IN THE NATIONAL INCOME AND PRODUCT ACCOUNTS 5

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Table 1. Continued

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

Product Accounts

(Billions of dollars)

Source: Congressional Budget Office.

Note: OASDI = Old-Age, Survivors, and Disability Insurance; HI = Hospital Insurance.

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

diminish when the Bureau of Economic Analysis makes subsequent revisions to the NIPAs. 

b. Includes coverage differences not shown elsewhere above.

Actual

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Differences (Continued)

54 57 62 64 69 73 80 83 87 93 99 106

Deposit insurance premiums 1 7 12 15 17 16 7 3 3 3 3 3

Government contributions for 

OASDI and HI for employees 17 18 19 20 21 22 23 25 26 27 28 29

21 19 21 24 25 26 25 25 26 25 26 27

Surpluses of government enterprises -1 -5 -6 -11 -6 -8 -9 -9 -10 -11 -11 -12

32 33 33 33 34 35 36 37 37 38 37 36 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___

126 129 140 146 160 165 163 163 169 175 182 189

2 -2 0 -27 27 1 0 0 -36 -3 39 0

-74 -203 -53 -14 -2 8 24 33 37 31 33 34

___ _____ ____ ___ ___ ___ ___ ____ ___ ___ ____ ____

Total Differences 25 -597 -35 -9 91 74 95 109 89 127 186 157

3,047 3,314 3,514 3,539 3,576 3,721 3,907 4,069 4,246 4,437 4,643 4,855

-459 -1,667 -1,139 -693 -331 -300 -310 -282 -327 -312 -325 -423

Treatment of investment and

24 33 33 35 37 39 40 41 42 42 43 43

-62 -27 -36 -38 -41 -45 -50 -55 -61 -68 -75 -82

-29 -22 -13 -17 -37 -43 -48 -52 -56 -61 -65 -69

52 264 89 80 74 69 68 67 66 66 65 66

-13 220 4 5 -9 4 -1 -1 0 0 -3 0

10 14 15 15 15 15 16 16 17 17 18 19

000000000000 ___ ___ __ __ __ __ __ __ __ __ ___ ___

-17 482 92 79 39 39 26 17 7 -4 -16 -23

-2 2 7 30 -42 -7 12 0 36 3 -39 0

76 232 51 -18 4 -14 -17 -35 -36 -33 -31 -35 ___ ____ ____ ___ ___ ___ ___ ____ ___ ____ ____ ____

Total Differences 58 716 150 92 1 18 21 -19 7 -34 -86 -58

-440 -1,010 -1,065 -672 -397 -347 -355 -368 -389 -417 -460 -508

Other adjustmentsa

Net Federal Government Saving

Expenditures (Continued)

Geographic adjustments

Universal Service Fund

Subtotal, coverage

Timing adjustments

Estate and gift taxes

Capital transfers

Lending and financial 

adjustments

Coverage

depreciation

Contributions for government

employees' retirement

Expenditures in the NIPAs

Net Federal Government Saving

Budget Deficit (-) or Surplus

Differences

Other

Subtotal, netting

Timing adjustments

Other adjustmentsb

Netting

Medicare premiums

Income receipts on assets
6 THE TREATMENT OF FEDERAL RECEIPTS AND EXPENDITURES IN THE NATIONAL INCOME AND PRODUCT ACCOUNTS

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and “Lending and financial adjustments” under 

“Expenditures.” 

Recent federal transactions that fall into the general categories of capital transfers and asset exchanges include 

transactions associated with the Troubled Asset Relief 

Program (TARP) and the government’s infusions of 

money into Fannie Mae and Freddie Mac, two large government-sponsored enterprises (GSEs) that help provide 

financing to mortgage markets. 

The federal budget records the net subsidy costs of TARP 

transactions as outlays. That treatment, which is mandated by the Emergency Economic Stabilization Act of 

2008, is consistent with the budgetary treatment of government loans and loan guarantees under credit reform, 

but with adjustments for market risk.10

The government’s new conservatorship of Fannie Mae 

and Freddie Mac has led to disagreement about how 

those GSEs should be treated in the federal budget. The 

official Budget of the United States Government published 

by the Administration treats them as entities separate 

from the government and records the Treasury’s purchases of their preferred stock on a cash basis. In CBO’s 

view, however, the management and financial control 

that the federal government now exercises over Fannie 

Mae and Freddie Mac indicates that they should be 

included in the federal budget. Consequently, CBO’s 

baseline budget projections reflect the estimated subsidy 

costs of the two GSEs’ transactions, adjusted for market 

risk in the same way that TARP transactions are. At the 

same time, CBO considers federal purchases of the GSEs’ 

preferred stock to be intragovernmental and thus does 

not include them in its baseline projections.11

In the NIPAs, neither the subsidy costs nor the underlying purchases of securities associated with the TARP 

and the activities of Fannie Mae and Freddie Mac are 

included in federal current expenditures because they are 

considered capital transfers or exchanges of existing 

assets.12 However, stock dividends are recorded as federal 

receipts, and administrative costs as part of federal expenditures. Loans made through the TARP, such as those to 

troubled automakers, are viewed as financial transactions 

and thus excluded (as are most of the transactions of 

other federal credit programs).

Credit Programs

For federal programs that make or guarantee loans, only 

estimated subsidy costs and administrative costs are 

included as outlays in the budget. Cash flows from loan 

disbursements, repayments, and interest are reported in 

what are termed financing accounts, which have no effect 

on budget outlays.

As with the budget, the NIPAs record administrative 

costs and generally exclude loan disbursements, repayments, and other cash flows that are considered exchanges 

of existing assets or financial and lending transactions 

unrelated to current production. But unlike the budget, 

the NIPAs include the interest receipts from credit programs as part of federal receipts and do not record subsidy costs. In Table 1, those differences in the treatment 

of credit programs are recorded in two places: Under 

“Receipts,” the difference in the treatment of loan interest 

is included as part of “Income receipts on assets”; under 

“Expenditures,” the row labeled “Lending and financial 

adjustments” shows the differences in the way loan subsidies are handled.

Geographic Coverage

The NIPAs currently exclude all government transactions 

with Puerto Rico and other U.S. territories; their current 

production is not part of the nation’s GDP as defined in 

the NIPAs.13 Federal transfers dominate those transactions, so excluding them tends to increase the NIPAs’ 

measure of net federal government saving relative to the 

budget’s measure of saving, the federal deficit or surplus. 

That difference in coverage is shown in Table 1 as “Geographic adjustments.”

Universal Service Fund 

The business activity of the Universal Service Fund, 

which provides resources to promote access to 

10. More specifically, the present value of future cash flows in the 

TARP is computed using an appropriate discount factor that recognizes the riskiness of those cash flows. 

11. See Congressional Budget Office, The Budget and Economic 

Outlook: Fiscal Years 2009 to 2019 (January 2009), p. 26.

12. See “The 2008 Financial Crisis and the National Accounts” in 

Department of Commerce, Bureau of Economic Analysis, GDP 

and the Economy: Advance Estimates for the Fourth Quarter of 2008 

(February 2009).

13. In July 2009, this treatment will be changed to include some 

transactions with U.S. territories in federal current receipts and 

expenditures. See “Preview of the 2009 Comprehensive Revision 

of the NIPAs,” Survey of Current Business (March 2009). 
THE TREATMENT OF FEDERAL RECEIPTS AND EXPENDITURES IN THE NATIONAL INCOME AND PRODUCT ACCOUNTS 7

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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). 

Interest Receipts

In the NIPAs, federal interest income is grouped with 

other types of federal receipts (in the category “Income 

receipts on assets”) rather than netted against federal 

interest payments, as it is in the federal budget.14 BEA’s 

treatment is consistent with international accounting 

practices, in which interest receipts and payments are 

reported separately. The difference in how the NIPAs and 

the federal budget treat interest receipts increases the 

NIPAs’ measure of government receipts relative to federal 

budget revenues and also increases the NIPAs’ measure of 

government expenditures 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 impact on the NIPAs’ measure of 

net federal government saving. 

Surpluses of Government Enterprises

In the NIPAs, the surpluses 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 follows international accounting 

standards, which generally advocate reporting spending 

on a gross, rather than a net, basis. In the federal budget, 

by contrast, surpluses of government enterprises are 

treated as offsetting receipts. 

Military Sales and Assistance In-Kind

Because the NIPAs try to identify contributions to GDP 

by sector, the military’s purchases of equipment and services that are intended to be sold or given to foreign governments are not included in the category of federal consumption. 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 transactions 

are also recorded in the federal sector in the NIPAs as 

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 

an outlay, the proceeds from those sales are recorded as 

offsetting receipts. 

Timing Differences 

As much as is possible, the NIPAs attempt to measure the 

flow of income when it is earned (on an accrual basis) 

rather than when it is received (on a cash basis).15 For 

example, BEA attributes corporate tax payments to the 

year in which the liabilities are incurred rather than to 

the year in which the taxes are actually paid. 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 when 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 whereas 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 

14. About half of the NIPAs’ interest receipts, those that derive mainly 

from penalties on late tax payments, are recorded as revenues in 

the federal budget.

15. See United Nations, System of National Accounts (1993), 

paragraph 3.19, which emphasizes reporting transactions on an 

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

over the years 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.
8 THE TREATMENT OF FEDERAL RECEIPTS AND EXPENDITURES IN THE NATIONAL INCOME AND PRODUCT ACCOUNTS

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are not consistent with accrual accounting. Timing 

adjustments for the net effects of enacted legislation are 

shown in Table 1 under “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. The federal budget records those final 

payments on a cash basis, but 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 years; 

thus, they appear in the “Other adjustments” category 

under “Receipts” in Table 1.16

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 spread evenly over the four quarters 

of the calendar year in which they are paid. (Like accrual 

accounting, that treatment avoids spikes, but unlike 

accrual accounting, 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.17 Again, those 

adjustments are difficult to identify for recent years and 

therefore are not shown separately in Table 1. They 

appear instead in the category “Other adjustments” under 

“Receipts.” 

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

align military compensation and government transfer 

payments—such as veterans’ benefits, Supplemental 

Security Income (SSI) payments, and Medicare’s payments to health care providers—with income that is 

reported on an accrual basis in the NIPAs. Misalignments 

can occur because quirks in the calendar (the timing of 

holidays, weekends, or leap years) can accelerate payments or because legislation can specifically delay 

payments. 

SSI payments and veterans’ benefits are usually disbursed 

on the first day of each month, but if that day falls on a 

weekend or holiday, payments are made a day or more in 

advance. If that occurs in October, 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.

Military compensation is normally paid at the beginning 

and middle of each month, but like SSI, it may sometimes be paid early to avoid weekends. The NIPAs 

include a similar timing adjustment that always ensures 

24 military compensation payments in a year, versus the 

23 or 25 payments that can occur in the budget in some 

years. Under “Expenditures” in Table 1, the row labeled 

“Timing adjustments” reflects such regularizing for transfer payments and military pay. 

In another contrast with the federal budget, the NIPAs 

record Medicare payments on an accrual basis rather than 

on a cash basis.18 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. However, that timing adjustment 

has only a small effect on the NIPAs’ measure of net 

federal government saving. 

16. “Other adjustments” include timing differences not shown elsewhere in Table 1, plus discrepancies between numbers in the 

NIPAs and the budget that may diminish when BEA makes later 

revisions to the NIPAs.

17. 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 revenue projections incorporate the assumption that those 

changes do occur as scheduled.

18. Beginning with its July 2008 annual revisions to the NIPAs, 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 the treatment of other Medicare benefits in 

the federal sector in the NIPAs.
THE TREATMENT OF FEDERAL RECEIPTS AND EXPENDITURES IN THE NATIONAL INCOME AND PRODUCT ACCOUNTS 9

CBO

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—for instance, 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, which are negative outlays in the budget, are 

treated in the NIPAs as government receipts (contributions for government social insurance and current transfers from business—for example, fines and fees, and taxes 

on production and imports). Those differences are shown 

in Table 1 in the category “Netting.” Because they affect 

total current receipts and total current expenditures by 

exactly the same amounts, they have no impact on the 

NIPAs’ measure of net federal government saving.

Presentation of the Federal 

Government’s Receipts and 

Expenditures in the NIPAs

Like the budget, the federal sector in the NIPAs classifies 

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

NIPAs record 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). Some of those receipt 

classifications help determine NIPA measures such as disposable income and corporate profits after taxes. 

Similarly, the government’s expenditures are classified in 

the NIPAs according to their purpose. The major categories, which are fewer than in the federal budget, are consumption expenditures (spending on goods and services, 

including the costs of capital depreciation, with separate 

estimates for defense and nondefense spending), current 

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 

for immediate use in production. The largest share of 

such consumption is compensation for military and civilian federal employees. Among the government’s other 

consumption expenditures, the consumption of fixed 

capital (depreciation) represents a partial measure of the 

services the government receives from its stock of fixed 

assets (buildings, equipment, and software).

Current transfer payments comprise cash payments that 

the federal government makes directly to individuals and 

the rest of the world, as well as grants to state and local 

governments or foreign nations. Most of the transfer payments to individuals are for social benefits. Grants-in-aid 

consist of payments to state or local governments, which 

the recipient governments generally use for transfer payments themselves (such as Medicaid benefits) and for 

consumption (such as the hiring of police officers). Current transfers to the rest of the world include payments of 

federal foreign aid. 

The NIPAs’ category for federal interest payments shows 

only payments and thus differs from the budget category 

labeled “net interest,” in which such payments are offset 

by federal interest receipts. In the NIPAs, federal interest 

receipts are classified with other federal receipts. 

The NIPAs’ final category of government expenditures, 

“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.

The bottom-line measure in the NIPAs’ federal sector is 

net federal government saving, which is the difference 

between the sector’s current receipts and current expenditures.19 It is a component of net national saving and thus

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

equals net federal saving plus depreciation (consumption of fixed 

capital).
10 THE TREATMENT OF FEDERAL RECEIPTS AND EXPENDITURES IN THE NATIONAL INCOME AND PRODUCT ACCOUNTS

CBO

Table 2.

Baseline Receipts and Expenditures as Measured by the National Income and 

Product Accounts 

(Billions of dollars)

Continued

is a partial measure of how much of the nation’s income 

from current production is not consumed in the current 

period.20 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.21

Actual

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

1,134 990 1,001 1,294 1,487 1,617 1,726 1,833 1,937 2,046 2,148 2,255

327 161 244 305 350 350 369 368 373 373 377 372

Taxes on production and imports 96 100 105 114 121 125 128 131 134 137 139 141

Taxes from the rest of the world 16 14 15 17 18 19 20 21 22 23 24 25 _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____

1,574 1,265 1,365 1,729 1,975 2,111 2,244 2,353 2,466 2,579 2,689 2,793

967 965 1,006 1,057 1,112 1,170 1,221 1,262 1,304 1,351 1,403 1,457

35 49 53 58 63 65 58 56 60 62 64 68

31 30 31 33 35 37 37 38 38 38 39 40

-1 -5 -6 -11 -6 -8 -9 -9 -10 -11 -11 -12 _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____

2,607 2,305 2,449 2,867 3,179 3,374 3,551 3,700 3,857 4,020 4,183 4,347

Receipts

Current Tax Receipts

Taxes on personal income

Taxes on corporate income

Subtotal

Contributions for Government

Social Insurancea

Current Transfer Receipts

Income Receipts on Assets

Current Surpluses of Government

Enterprises

Total Current Receipts

20. Net national saving also includes net saving by the state and local 

government sector, personal saving, and corporate retained 

earnings.

21. 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 (such as estate and gift 

taxes) and capital transfer payments (such as 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 of this 

report.
THE TREATMENT OF FEDERAL RECEIPTS AND EXPENDITURES IN THE NATIONAL INCOME AND PRODUCT ACCOUNTS 11

CBO

Table 2. Continued

Baseline Receipts and Expenditures as Measured by the National Income and 

Product Accounts 

(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

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Consumption Expenditures 

544 568 573 562 559 561 566 575 587 601 614 629

80 85 88 91 94 97 99 102 106 109 112 116

256 291 312 311 311 312 317 320 327 335 343 353

30 31 32 33 33 33 34 34 34 34 34 35 ___ ___ ___ ___ ___ _____ _____ _____ _____ _____ _____ _____

910 975 1,005 997 997 1,003 1,016 1,032 1,054 1,079 1,104 1,132

1,345 1,510 1,582 1,608 1,621 1,687 1,780 1,853 1,941 2,045 2,169 2,297

444 4 5 5 5 6 6 6 7 7 _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____

1,349 1,514 1,586 1,613 1,626 1,692 1,786 1,858 1,947 2,052 2,175 2,304

383 469 546 517 490 496 503 520 542 568 597 628

38 36 36 35 35 35 35 35 36 36 37 37 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___

422 505 581 552 525 530 538 555 578 604 634 666

320 271 291 327 378 446 518 573 616 650 678 700

47 49 50 50 50 50 50 50 51 51 52 53 _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____

3,047 3,314 3,514 3,539 3,576 3,721 3,907 4,069 4,246 4,437 4,643 4,855

-440 -1,010 -1,065 -672 -397 -347 -355 -368 -389 -417 -460 -508

Expenditures

(Purchases of goods and services)

Defense

Consumption

Consumption of fixed capital

Nondefenseb

Consumption

Consumption of fixed capital

Subtotal

Current Transfer Payments

Government social benefits

To persons

To the rest of the world

Subtotal

Other transfer payments 

Grants-in-aid to state and

local governmentsb

To the rest of the world

Expenditures

Net Federal Government Saving

Net Federal Government Saving

Subtotal

Interest Paymentsb

Subsidies

Total Current