# MID-SESSION REVIEW

BUDGET OF THE U.S. GOVERNMENT FISCAL YEAR 2012

OFFICE OF MANAGEMENT AND BUDGET

BUDGET.GOV

# MID-SESSION REVIEW

BUDGET OF THE U.S. GOVERNMENT FISCAL YEAR 2012

OFFICE OF MANAGEMENT AND BUDGET

# EXECUTIVE OFFICE OF THE PRESIDENT

OFFICE OF MANAGEMENT AND BUDGET

WASHINGTON D. C. 20503

THE DIRECTOR



# September 1, 2011

The Honorable John A. Boehner

Speaker of the House of Representatives

Washington, DC 20510

Dear Mr. Speaker:

Section 1106 of Title 31, United States Code, requests that the President send to the Congress

a supplemental update of the Budget that was transmitted to the Congress earlier in the year.

This supplemental update of the Budget, commonly known as the Mid-Session Review, contains

revised estimates of receipts, outlays, budget authority, and the budget deficit for fiscal years

2011 through 2021.

Sincerely,

Jacob J. Lew

Director

Enclosure

Identical Letter Sent to the President of the Senate

# i 

# TABLE OF CONTENTS

List of Tables

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Summary

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Economic Assumptions

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Receipts

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Expenditures

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Summary Tables

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# iii 

# LIST OF TABLES

Table 1

. Changes in Deficits from the F ebruary Budget

����������������������������������������������������������������� 6

Table 2

. Economic Assumptions

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Table 3

. Comparison of Economic Assumptions

���������������������������������������������������������������������������� 12

Table 4

. Alternative Economic F orecast

����������������������������������������������������������������������������������������� 13

Table 5

. Change in Receipts

������������������������������������������������������������������������������������������������������������ 17

Table 6

. Change in Outla ys

������������������������������������������������������������������������������������������������������������� 22

Table S–1

. Budget T otals

��������������������������������������������������������������������������������������������������������������������� 24

Table S–2

. Effect of Budget Proposals on Projected Deficits

������������������������������������������������������������� 25

Table S–3

. Adjusted Baseline by Category

����������������������������������������������������������������������������������������� 26

Table S–4

. Proposed Budget by Category

������������������������������������������������������������������������������������������� 28

Table S–5

. Proposed Budget by Category as a P ercent of GDP

�������������������������������������������������������� 30

Table S–6

. Proposed Budget in P opulation- and Inflation-Adjusted Dollars

����������������������������������� 32

Table S–7

. Bridge from Budget Enforcement Act Baseline to Adjusted Baseline

���������������������������� 34

Table S–8

. Change in the Adjusted Baseline from Budget to MSR

�������������������������������������������������� 35

Table S–9

. Mandatory and Receipt Proposals from the F ebruary Budget

��������������������������������������� 37

Table S–10

. Outla ys for Mandatory Programs under Current Law

��������������������������������������������������� 51

Table S–11

. Funding Levels for Appropriated (“Discretionary”) Programs by Category

������������������ 52

Table S–12

. F ederal Government Financing and Debt

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# 1 

# SUMMARY

This Mid-Session Review (MSR) updates

the Administration’s estimates for outlays, re

ceipts, and the deficit for economic, legislative,

and other changes that have occurred since

the President’s 2012 Budget was released in

February

. The 2011 deficit is now projected to

be $1

. 316 trillion, $329 billion or 20 percent

lower than the $1

. 645 trillion deficit projected

in February, due to a combination of high

er-than-expected receipts and lower-thanexpected outlays

. As a percentage of gross

domestic product (GDP), the deficit is now

projected to equal 8

. 8 percent, down from 10

. 9

percent projected in February

. The deficits for

each of the following 10 years are also project

ed to be lower than previously projected, with

a total reduction of $1

. 45 trillion over the 10-

year period

. This reduction results primarily

from the terms of the Budget Control Act of

2011, which the President signed on August

2

. The Budget Control Act lowers future defi

cits by establishing caps on annually appro

priated (“discretionary”) spending each year

from 2012 through 2021

. It also established

a process for achieving further deficit reduc

tion with the creation of a bipartisan, bicam

eral congressional committee (the Joint Select

Committee on Deficit Reduction) tasked with

recommending spending and revenue propos

als that yield $1

. 5 trillion in deficit reduction

over the 10-year period, about $500 billion in

deficit reduction beyond the proposals laid out

in the President’s Budget

.

As described more fully below, the work

of the Joint Committee is critical to achiev

ing fiscal sustainability

. What is more, the

Committee’s already difficult task will be

made even more challenging by the fact that

its recommendations will need to take into

consideration the current economic climate

. On the one hand, due to extraordinary pol

icy efforts, the economy already has made

substantial progress recovering ground lost

during the financial crisis and subsequent

18-month recession

. Between the middle of

2009 and the end of 2010, the economy grew

for six consecutive quarters, with real GDP

rising at an average annual rate of 3 percent;

after shedding 8

. 8 million jobs over the previ

ous two years, the private sector created 1

. 3

million new jobs in 2010; the financial system is no longer in crisis; credit and capital mar

kets have returned to normal levels; and the

cost of stabilizing the financial and automo

bile sectors has amounted to a fraction of ini

tial estimates

. On the other hand, the reces

sion was deeper than originally reported, and

the headwinds the economy has encountered

are stronger than anticipated

. First, revised

estimates showed that the recession includ

ed the worst six-month period of contraction

since quarterly data has been collected, fall

ing at an average annualized rate of 7

. 8 per

cent in the fourth quarter of 2008 and the first

quarter of 2009

.

Second, 2011 has seen drags on the econo

my in the form of a sharp rise in oil prices, the

disruption to global supply chains as a result

of the earthquake in Japan, a slowdown of

growth in Europe, a sluggish rebound in the

housing market, and uncertainty surround

ing congressional action on the debt ceiling,

all of which have delayed the recovery further

. In sum, economic growth and job creation,

while positive, have not been strong enough

to bring down the unemployment rate to an

acceptable level

.

That is why, in addition to the actions that

were taken at the depth of the financial cri

sis, the Administration has taken significant

steps to strengthen the recovery

. On December

17, 2010, the President signed into the law

the bipartisan Tax Relief, Unemployment

Insurance Reauthorization, and Job Creation

Act, which prevented a tax increase on mid

dle-class Americans, cut payroll taxes for 159

million workers, extended unemployment

benefits for 7 million unemployed Americans,

and provided a series of tax incentives to busi

nesses to spur growth

. These measures ha ve helped buffer the economy against recent

headwinds—for example, by providing house

holds with a significant boost to their income

that has helped to offset the increase in gaso

line prices

. Moreover, in constructing the 2012

Budget, the President laid out a plan for sig

nificant deficit reduction even while ensuring

that these efforts did not threaten the recov

ery and maintaining investments in the ele

ments critical to long-term economic growth:

clean energy, innovation, education, and in

-

# 2 MID-SESSION REVIEW



# frastructure

. In the long run, only by living

within our means will we be able to make the

investments necessary to win the future in a

competitive global economy

.

THE 2012 BUDGET AND

SUBSEQUENT DEVELOPMENTS

Accordingly, in February, the President’s

2012 Budget provided a significant down pay

ment on the deficit reduction that we need to

take, including proposing $1 trillion in deficit

reduction over the next 10 years on top of the

$2 trillion in projected savings from winding

down operations in Afghanistan and Iraq and

the expiration of the high-income tax cuts

passed in 2001 and 2003

. That Budget would

have reduced the deficit to 3 percent of GDP

by the middle of the decade and sustained

that level for many years thereafter

. By re

ducing the deficit to this size in relation to

the economy, we no longer would be adding

to the Government’s debt burden through ad

ditional Federal spending, but would instead

be achieving what economists call “primary

balance

. ” At the same time, the 2012 Budget

included investments in areas critical to win

ning the future: education, innovation, clean

energy, and infrastructure

.

Since the 2012 Budget was released, there

have been three significant developments

that affect both the budget itself and fiscal

policy generally

. First, on April 15, 2011, the

President signed into law the Department

of Defense and Full-Year Continuing

Appropriations Act, 2011, to provide for ap

propriations for the rest of fiscal year 2011

. This legislation cut discretionary spend

ing by roughly $80 billion relative to the

President’s 2011 Budget request

. In nomi

nal terms, these were the largest one-year

cuts in history

. Cuts of this magnitude en

tailed not only eliminating wasteful and du

plicative programs, but also making cuts to

programs that the Administration supports

and would not have made if not for the fis

cal situation

. For instance , the new funding

levels set in this agreement mean delaying

the goal of doubling funding for key research

and development (R&D) agencies along

with ambitious goals set for the Nation in

the President’s Budget in the areas of global

health and international development

. At

the same time, this legislation allowed for

continued investments in education, inno

vation, and critical health programs and did

not include many extraneous, ideological

provisions that many in Congress desired

that would have, for example, damaged im

portant efforts to reform our financial sys

tem and improve the quality and accessibil

ity of affordable health care

.

Second, after the 2011 appropriations

were finally completed, the President looked

again to the future and presented a revised

fiscal framework, building on the Budget re

quest, that laid out a comprehensive and bal

anced strategy to cut spending, bring down

Government debt, increase confidence in

our Nation’s fiscal strength, and support our

economic recovery while making the invest

ments we need to win the future

. Altogether

, the plan would have reduced the deficit by $4

trillion over 12 years

. The framework would

have saved approximately $770 billion over

12 years in non-security discretionary spend

ing and sought to save $400 billion in security

discretionary spending after a comprehensive

review of our military’s role, missions, and ca

pabilities

. In health care—a key driver of our

long-term deficits—the framework identified

changes to Medicare and Medicaid that would

build on the efficiencies in the Affordable

Care Act (ACA), saving $340 billion by 2021

and at least $1 trillion in the subsequent de

cade, while strengthening these programs for

future generations

. The framework also in

cluded a target of $360 billion in other man

datory savings by 2023

. W ith respect to taxes,

the plan called for cutting tax expenditures

in order to lower tax rates while still reduc

ing the deficit

. The framework also reiterated

the President’s position that the 2001 and

2003 tax cuts for those in the top 2 percent of

earners should expire

. Finally , the President

called for a “debt failsafe” trigger to ensure a

decline in Government debt as a share of the

economy

. Specifically, the President proposed

a trigger that would require, by the second

half of the decade, our Nation’s debt to be on

a declining path as a share of our economy

. If

that target were not met by 2014, there would

be automatic spending cuts (both in direct

spending and spending through the tax code)

as insurance against inaction

.

The President’s fiscal framework set the

stage for the third significant development

that has occurred since the release of the 2012

Budget, negotiations this summer between

# 3 SUMMARY



# the Administration and Congress on deficit

reduction and raising the statutory debt limit

. Considering that both parties had agreed on

the size of the deficit reduction necessary—$4

trillion over the next decade—there was hope

that a balanced package of that size, which in

cluded both spending cuts and revenue mea

sures, could be agreed to

. In pursuit of this

goal, the President called for an agreement on

a bold plan that would have included many

significant compromises for him and his par

ty

. Unfortunately, congressional Republicans

would not agree to a package that included

revenue increases

. Agreement on a smaller

package limited to spending cuts was finally

reached over the last weekend in July, just be

fore the Government exhausted its options for

continuing to finance obligations under the

existing debt limit

.

The President signed the resulting agree

ment, the Budget Control Act of 2011, into law

on August 2

. According to the Congressional

Budget Office, the provisions of the Act would

reduce the deficit by at least $2

. 1 trillion over

the next decade

. The first step toward this

goal consists of approximately $900 billion

in deficit reduction achieved through tight

caps on discretionary spending

. These caps

will bring discretionary spending to its lowest

level as a share of the economy since Dwight

D

. Eisenhower was President

. The caps were

designed to ensure that spending cuts were

balanced between security and non-security

programs by setting specific targets for each

category during the first two years

. Assuming

that the reductions continue to be shared

across security and non-security programs

over the remainder of the 10-year period, the

caps would generate $420 billion savings on

security programs, an amount that includes a

projected $350 billion in defense savings

.

The second step toward the $2

. 1 trillion in

deficit reduction is the establishment of the

bipartisan, bicameral Joint Select Committee

charged with finding $1

. 5 trillion in addition

al deficit reduction by the end of November

2011

. Under the Act, if the J oint Committee

is unsuccessful or if Congress fails to pass

the Joint Committee’s plan, then a sequester

would be triggered that would cut $1

. 2 tril

lion in spending over 10 years, split evenly

between defense and non-defense programs

. This trigger is modeled on those devised for

the Gramm-Rudman-Hollings legislation in the 1980s—legislation that created automatic

consequences based on congressional action

or inaction that led to a period of significant

deficit reduction

. In addition to the deficit re

duction included in the Budget Control Act,

further deficit reduction can be achieved if

the 2001 and 2003 tax cuts for the wealthiest

Americans are allowed to expire at the end of

calendar year 2012

. The President has con

sistently said that he will refuse to let these

tax cuts be extended

. Allowing these tax cuts

to expire as scheduled and returning the es

tate tax to its 2009 levels will increase rev

enue by $866 billion over the next 10 years

. Moreover, by reducing the amount that the

Government needs to borrow, this additional

revenue will lead to $160 billion in lower in

terest costs, bringing total deficit reduction

from this change in the tax code to more than

$1 trillion over the next 10 years

.

Depending on whether the Joint Committee

succeeds or the fallback spending trigger is

activated, the Budget Control Act of 2011 will

reduce deficits by $2

. 1 to $2

. 4 trillion over

the coming 10 years

. Allowing the 2001 and

2003 tax cuts for the wealthiest Americans to

expire further increases the total deficit re

duction to $3

. 1 to $3

. 4 trillion, equivalent to

about 1

. 5 percent of 10-year GDP

.

As shown in this Mid-Session Review, the

deficit reduction from the new discretionary

caps, the pending recommendations of the

Joint Committee, and the expiration of the

upper-income tax cuts, combined with wind

ing down operations in Afghanistan and Iraq,

will bring deficits down to approximately 2

. 2

percent of GDP toward the end of the 10-year

budget window

. These policy changes would

be sufficient to put the debt on a declining

path as a share of the economy and would

therefore place the budget in a fiscally sus

tainable position

. The recommendations of

the Joint Committee are the key to achieving

this, which is why the President will recom

mend an ambitious, comprehensive, and bal

anced deficit reduction plan to Congress in

September that would place the country on

firm fiscal footing by the middle of this decade

.

At the same time, Congress must appreciate

that the economy is still wrestling with the

after-effects of a very severe recession

. Thus,

in addition to focusing on long-term deficit

reduction, the President will introduce after

# 4 MID-SESSION REVIEW



# Labor Day a package of meaningful, new ini

tiatives to promote economic growth and cre

ate jobs

. These will build on the actions the

President has been urging Congress to com

plete that will strengthen the economy and

create jobs, but also include new measures

that will accelerate job growth in the short

term

. These could include a mix of tax cuts

to create jobs and provide economic security

to the middle class, innovative infrastructure

ideas to put people back to work, and some

measures specifically targeted at the longterm unemployed and other specific sectors of

the economy that are in particular need

.

MID-SESSION UPDATE

The Mid-Session Review updates estimates

of Federal receipts, outlays, and the deficit for

legislation enacted through August 3, 2011—

principally the Budget Control Act of 2011—

and for a revised economic forecast, technical

re-estimates, and other policy changes that

have occurred since the February Budget was

released

. The economic forecast, like the one

in the Congressional Budget Office’s August

update, is based on economic data available

through late June

. In addition, reflecting the

substantial data revisions since that date, the

Mid-Session Review presents an alternative

economic forecast using the latest available

data along with estimates of the associated

budgetary consequences of this forecast revi

sion

. As shown in Table 4, the budgetary ef

fects of the latest economic data are generally

similar to the forecast based on data from late

June

.

Revised Deficit and Debt Outlook

The deficit for 2011 is now expected to be

$1

. 316 trillion, down $329 billion from the

deficit of $1

. 645 trillion deficit estimated in

February

. As a percentage of GDP , the 2011

deficit is projected to be 8

. 8 percent of GDP,

as compared to 10

. 9 percent of GDP project

ed in February

. This latest projection also

represents a slight decline in the deficit as

a percent of GDP from 9

. 0 percent in 2010

. A little less than half of the reduction in the

estimated 2011 deficit from February is due

to higher receipts

. The remainder is due to a

combination of lower discretionary appropria

tions for 2011 than in the February Budget,

as provided in the full-year continuing appro

priations enacted in April, and slower-thanexpected spending across a range of Federal

programs, including defense discretionary

spending, purchases of GSE preferred stock,

and unemployment benefits

. The lower pro

jected deficit this year means that the Federal

Government’s borrowing needs should be low

er as well

.

Relative to the February estimate, defi

cits are also expected to be lower in 2012

and in each subsequent year of the 10-year

budget window, amounting to a total reduc

tion of $1

. 450 trillion over 2012 through

2021

. In 2012, deficits are expected to be

$145 billion lower as a result of a combi

nation of enacted legislation and policy

changes ($91 billion) and economic and

technical re-estimates ($54 billion, chiefly

from higher receipts)

. Over the 10-year

horizon, the total of $1

. 450 trillion deficit

reduction from February is more than ac

counted for by the effect of enacted legis

lation and policy changes ($1

. 490 trillion)

. The revised Mid-Session Review economic

forecast, discussed in detail in the next sec

tion, increases deficits by $696 billion over

the 10-year period while technical revisions

to revenue and spending estimates reduce

deficits by a nearly offsetting amount

. Taken together, the combined effect of the

revisions to the economic projections and

the technical re-estimation produces a defi

cit increase of $40 billion over the 10-year

horizon

. Using the alternative economic

forecast that reflects data through late

August, the economic and technical re-esti

mate would produce a $220 billion increase

in the deficit over the next decade

.

Federal Government debt held by the pub

lic can be viewed as the sum of all prior defi

cits less prior surpluses and is an important

indicator of the extent to which Government

activity affects the financial markets

. Debt

held by the public is projected to be $10

. 264

trillion at the end of 2011, or 68

. 6 percent

of GDP, lower than the 72

. 0 percent of GDP

projected in February

. Some debt held by

the public was used to issue direct loans or

to purchase financial assets as part of the

Troubled Asset Relief Program (TARP)

. Debt held by the public excluding these

and other financial assets is projected to be

$9

. 194 trillion at the end of 2011, or 61

. 4

percent of GDP, down from February’s esti

mate of 63

. 0 percent of GDP

.

# 5 SUMMARY



# For 2012, debt held by the public is pro

jected to increase to $11

. 307 trillion, or 72

. 1

percent of GDP, and to increase further to

73

. 5 percent of GDP in 2013

. After 2013,

however, the deficit is projected to decline

to levels that result in a declining debt-toGDP ratio, with debt reaching 70

. 5 percent

of GDP by the end of the 10-year budget

window

. Debt net of financial assets is also

projected to increase in 2012 and 2013, but

then to begin declining, reaching 61

. 3 per

cent of GDP in 2021

.

Enacted Legislation

Full-year appropriations

. The full-year

appropriations act, enacted on April 15, ex

tended continuing appropriations at a level

that was roughly $80 billion below the level

proposed in the February Budget

. The act

also made changes to the Pell Grant program

and repealed the Free Choice Voucher pro

gram originally enacted under the Affordable

Care Act

. Relative to the F ebruary Budget,

the full-year appropriations act reduces the

deficit by $51 billion in 2011 and by $49

billion over the subsequent 10 years, 2012

through 2021

.

Budget Control Act. The Budget

Control Act of 2011, enacted on August 2,

authorized increases in the debt ceiling and

included a number of provisions that re

duce budget deficits over the next 10 years

. Incorporating the caps on discretionary bud

get authority enacted in the Act in the MidSession Review reduces spending relative

to the February Budget by $740 billion over

the next 10 years

. Additional provisions in

the Act that relate to program integrity ini

tiatives and higher education financial as

sistance bring the reduction in spending to

a total of $753 billion

. This total does not

include the effects of future deficit reduc

tion recommended by the Joint Committee,

as discussed below

.

Other enacted legislation and debt ser

vice. Other enacted legislation, including

the Comprehensive 1099 Taxpayer Protection

and Repayment of Exchange Subsidy

Overpayments Act of 2011, has a minimal ef

fect on the deficit

. Debt service on the effects

of enacted legislation brings the total deficit

reduction due to enacted legislation to $989

billion over 10 years

. Estimating Changes

New estimates of receipts and outlays due

to revisions to the economic forecast and tech

nical revisions reduce the deficit significantly

in 2011

. These changes reduce the deficit by

a smaller amount in 2012 and raise the deficit

slightly over the 10-year period as a whole

.

In 2011, revisions to the economic projec

tion and technical changes reduce the deficit

by $261 billion, largely because of updated

information about actual tax collections since

February and actual spending trends

. Higher

receipts account for $141 billion of this im

provement, with lower current-year spending

accounting for the remainder

. The reduction

in spending is split roughly evenly between

discretionary programs (largely slower-thananticipated spending for defense programs)

and mandatory programs (including lower

payments for GSE preferred stock purchases

and lower spending for unemployment and

veterans benefits)

.

Over the 10-year period, revisions to the eco

nomic projection and technical re-estimates

increase the deficit by $40 billion

. Receipts are reduced by $46 billion, as lower tax collec

tions due to revisions in the economic forecast,

chiefly lower near-term GDP growth and lower

projected wage and salary income, are par

tially offset by increases due to technical fac

tors, such as new data available from 2010 tax

returns

. Increases in outlays due to the new

economic forecast, mostly the result of higher

cost-of-living adjustments and debt service on

all economic changes, are very nearly offset by

reductions in outlays due to technical changes

. More detail about changes in receipt and out

lay projections can be found in the receipt and

spending sections of the Mid-Session Review

.

Deficit Reduction Allowance

The Joint Select Committee on Deficit

Reduction established by the Budget Control

Act is tasked with developing legislative pro

posals for reducing the deficit, with a tar

get of $1

. 5 trillion in deficit reduction

. The

Administration will be recommending a bal

anced array of options for reducing the deficit

that encompasses the entire budget includ

ing spending and revenue measures

. In light

of the ongoing Joint Committee process, the

Mid-Session Review includes a deficit reduc

-

# 6 MID-SESSION REVIEW



# tion allowance of $1

. 5 trillion over 10 years

. The February Budget included specific man

datory and receipt proposals that reduce the

deficit by $1

. 0 trillion

. The deficit allowance

in the Mid-Session Review substitutes for

the specific mandatory and receipt propos

als detailed in the February Budget, and is

not meant to prejudge any specific spend

ing or receipt proposals to be recommended by the Administration and considered by the

Committee

. The Administration will release

its recommendations for proposals to be con

sidered by the Joint Committee in September

. Relative to the policies already proposed in

February, the Mid-Session Review’s allowance

for Joint Committee deficit reduction reduces

the deficit by $501 billion over 10 years, in

cluding debt service

.



# Table 1. CHANGES IN DEFICITS FROM THE FEBRUARY BUDGET

(In billions of dollars)

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012-

2016 2012-

2021

February Budget deficit

������������������������������������������ 1,645 1,101 768 645 607 649 627 619 681 735 774

Percent of GDP

���������������������������������������������������� 10

. 9% 7

. 0% 4

. 6% 3

. 6% 3

. 2% 3

. 3% 3

. 0% 2

. 9% 3

. 0% 3

. 1% 3

. 1%

Enacted legislation:

Budget Control Act of 2011

��������������������������� –* –32 –51 –72 –75 –79 –82 –87 –89 –95 –90 –309 –753

2011 full-year appropriations

������������������������ –51 –21 –6 –3 –2 –2 –2 –2 –3 –4 –4 –35 –49

Other legislation

�������������������������������������������� 1 –1 1 1 1 * * * * * * 2 3

Debt service

���������������������������������������������������� –* –* –2 –6 –11 –16 –21 –26 –31 –36 –42 –35 –190

Subtotal, enacted legislation

������������������������������ –50 –54 –58 –80 –88 –97 –105 –115 –123 –135 –135 –376 –989

Economic and technical re-estimates:

Receipts

���������������������������������������������������������� –141 –65 –7 11 22 20 17 17 14 10 7 –19 46

Discretionary programs

��������������������������������� –58 13 22 9 –1 –5 –6 –8 –6 –6 –6 37 6

Mandatory:

Refundable tax credits

������������������������������� 8 6 7 10 14 16 16 15 16 16 17 53 133

Unemployment compensation

������������������� –11 –17 –14 –11 –10 –10 –10 –11 –11 –11 –12 –62 –117

Social Security

��������������������������������������������� –1 9 11 12 13 13 13 12 11 10 8 59 112

Medicaid

����������������������������������������������������� –3 –3 –3 –6 –8 –10 –10 –12 –13 –14 –19 –29 –98

Supplemental Nutrition Assistance

Program

�������������������������������������������������� * 5 3 4 7 8 8 8 7 5 7 28 62

Foreign Military Sales Trust Fund

������������ –* –1 1 1 * –1 –4 –4 –4 –4 –5 * –20

Purchases of GSE preferred stock

�������������� –25

......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... Veterans benefits

����������������������������������������� –10 3 2 2 2 2 2 2 3 3 2 11 24

Civilian and military retirement

��������������� –* 2 2 2 2 2 2 2 2 2 2 10 21

Medicare

������������������������������������������������������ –4 –8 –6 –5 –4 –3 2 3 4 4 8 –25 –4

Other

������������������������������������������������������������ –24 10 7 2 3 1 * –* –* –2 * 23 21

Total mandatory

�������������������������������������� –70 6 11 12 18 19 19 17 14 8 9 67 134

Net interest 1



# �������������������������������������������������� 10 –5 –23 –29 –13 –11 –8 –9 –12 –13 –16 –81 –140

Allowances for costs of future emergencies

������ –2 –3 –1 –* –* –* –*

......... ......... ......... ......... –6 –6

Subtotal, economic and technical re-estimates

� –261 –54 2 3 25 22 21 16 11 –1 –6 –1 40

Change due to moving the February Budget

proposals to the deficit reduction allowance 2



# ����� –19 –37 –63 –95 –23 8 –43 –53 –71 –60 –64 –211 –501

Total, changes

���������������������������������������������������������� –329 –145 –120 –171 –86 –66 –126 –152 –183 –195 –205 –588 –1,450

Mid-Session Review deficit

������������������������������������� 1,316 956 648 473 521 583 501 467 498 540 568

Percent of GDP

���������������������������������������������������� 8

. 8% 6

. 1% 3

. 9% 2

. 7% 2

. 8% 3

. 0% 2

. 4% 2

. 2% 2

. 2% 2

. 3% 2

. 3%

Note: positive figures represent higher outlays or lower receipts

. *$500 million or less

.

1 

# Includes debt service on all re-estimates

.

2 

# Includes debt service

.

# 7 

# ECONOMIC ASSUMPTIONS

This Mid-Session Review (MSR) updates

the economic forecast that was completed last

November and released with the 2012 Budget

in early February

. The 2012 Budget forecast

projected that the economic recovery which be

gan in 2009 would continue and that unemploy

ment would fall gradually from its elevated lev

els

. As the economy recovered, the 2012 Budget

forecast inflation to remain moderate, and inter

est rates to rise gradually

. In general terms, the

forecast for the MSR maintains these assump

tions but with modifications to take account of

information on changing conditions available at

the time of the completion of the MSR forecast,

in late June

. In addition, to reflect the substan

tial amount of economic turbulence over the

past two months, the MSR includes an alterna

tive economic forecast that incorporates the lat

est data through the end of August along with a

presentation of its associated budgetary effects

.

Real GDP has risen for eight straight quar

ters since economic growth resumed in mid2009

. Revisions to GDP growth published in

late July, after the MSR forecast was com

pleted, showed growth slowing sharply in

the first half of 2011

. The unemployment

rate has declined from its peak above 10 per

cent in October 2009 to 9

. 1 percent in July

2011

. Following the resumption of real GDP

growth, the economy began adding jobs, and

private sector employment has increased in

each of the past 17 months

. The labor market

recovery, however, is occurring only gradu

ally

. It will take several years of healthy job

growth to offset the nearly 9 million jobs

that were lost between January 2008 and

February 2010

.

Administration policies, as well as the auto

matic fiscal stabilizers such as the unemploy

ment insurance system, contributed to the

turnaround in 2009

. The American Recovery

and Reinvestment Act (Recovery Act) was

passed soon after the President took office at

a time when jobs were declining by 700,000

per month

. Recent revisions showed GDP fall

ing at that time at a rate even faster than

previously estimated when the President took

office, declining at an average annualized rate

of 7

. 8 percent in the fourth quarter of 2008

and the first quarter of 2009, the worst sixmonth period since quarterly data has been

collected

. The Administration’ s prompt action

helped to reverse this precipitous decline, and

the turnaround in real GDP growth, and later

in jobs, opened the way to an economic recov

ery

. Further actions by the Administration

and Congress, culminating in the passage

of the Tax Relief, Unemployment Insurance

Reauthorization, and Job Creation Act in

December 2010, have helped sustain demand

and foster growth as the Recovery Act has

phased out and as the economy has faced fur

ther, unanticipated challenges

.

For example, the steep decline in the hous

ing market ended in 2009, but the housing

sector has struggled to recover from the re

cession

. Almost 3 million homes have been

repossessed since 2006, but even so, at the

beginning of 2011, there were estimated to

be 5 million seriously delinquent mortgage

loans, many of which will eventually result

in foreclosure

. Government programs and

the private sector HOPE Now alliance have

helped nearly 5 million affected homeown

ers with their mortgages, either by helping

negotiate new terms for their loans or by

reducing outstanding balances, but the re

maining problems are still significant

. Until

more loans are resolved, house prices are not

likely to recover, and housing investment will

probably remain sluggish

. Likewise, spreads

between private debt, such as commercial pa

per, and Treasury securities have returned to

pre-crisis levels, but commercial banks and

other private lenders have tightened credit

standards and many credit-worthy borrowers

continue to have difficulty accessing credit,

making it difficult for businesses to expand,

entrepreneurs to launch ventures, and fami

lies to borrow to buy a new home or send a

child to college

. This is a common experience

following a financial crisis in which banks and

other credit market institutions have suffered

severe losses

. If past experience is a guide,

credit will eventually become more available,

but that will take more time

.

A second drag on the recovery has been fis

cal consolidation at the State and local govern

ment level

. Driven by balanced budget require

ments and decreased tax revenue, this fiscal

# 8 MID-SESSION REVIEW



# tightening has reduced aggregate demand

and slowed growth nationally

. Over the last 12

months, employment in State and local gov

ernment has declined by 340,000 jobs

.

Third, globally, a combination of events has

weighed on economic growth

. Political uncer

tainty in the Middle East caused world oil

markets to tighten, especially for the highquality crude oil that is most useful in refin

ing gasoline

. The price of oil rose by 16 per

cent between September and December 2010

and then rose another 20 percent in March

and April of this year, placing a burden on

American consumers

. Although the U

. S

. econ

omy is less sensitive to oil price shocks than it

was in the 1970s, higher fuel prices still exact

a toll, and this was one of the main factors

in holding growth below expectations in the

first half of 2011

. Also , on March 11, a severe

earthquake followed by a tsunami seriously

damaged the coastal regions of northeastern

Japan

. These natural disasters have had a

worldwide impact because they curtailed pro

duction of parts needed for Japanese automo

biles manufactured both in Japan and abroad

. In the United States, for example, production

of motor vehicles fell 6

. 3 percent (0

. 53 million

units at an annual rate) in the second quar

ter, with most of the decline occurring at the

American facilities of Japanese automakers

.

Moreover, the sovereign debt crisis that be

gan in 2010 in Europe has intensified in re

cent weeks, causing a selloff in global equity

markets that threatens to place a new drag

on consumer confidence and the global recov

ery

. Last year, several European countries en

countered difficulty in obtaining credit, and fi

nancial markets around the world responded

negatively to these developments spreading

the effects of the crisis to the United States

and elsewhere

. The European Union acted

forcefully to confront these issues when they

first emerged, and the affected governments

have attempted to restrain their budget defi

cits

. Even with these actions, however, the

European recovery remains at risk because of

increased uncertainty and because the mea

sures taken to address the fiscal crisis have

had the effect in some cases of limiting de

mand and hampering recovery

. Concerns over

sovereign debt returned in recent weeks and

spread to larger countries in the European

Union, creating volatility in global financial

markets

. Although the effects of these events are ex

pected to be temporary in most cases and the

Administration remains confident about me

dium-term prospects for growth in the United

States, the unexpected slowdown in 2011

led the Administration to reduce projections

in its MSR forecast for near-term growth in

2011 and 2012

. Meanwhile, new data re

leased since those projections were locked in

late June, including significant revisions to

previously released GDP data, together with

other analysis have led both private and pub

lic forecasters to reduce their projections for

growth and employment even further over the

past two months

. T o present a fuller picture,

this section also includes an alternative fore

cast in Table 4 below that reflects the latest

economic data and outlook

. While the effects

of the economic turbulence are great on indi

viduals, the cumulative impact on the fiscal

condition of the country is relatively minor

over the course of the budget window

.

Despite recent setbacks, the Administration

expects the economy to grow at increasing

rates in the months and years to come

. One

reason for this is that the U

. S

. economy is

operating well below its capacity, with high

er levels of unemployment and more unused

resources than at any time in over a quarter

century

. The potential for a sharp recovery

is present in this low level of resource uti

lization

. The normal limits to growth are

not binding when there is so much unused

capacity available

. W ith rapid growth pro

jected in 2013-2017, the unemployment rate

is projected to decline and real GDP is pro

jected to return to its potential level

. Beyond

2017, the Administration’s forecast is based

on the long-run trends expected for real GDP

growth, price inflation, and interest rates

. Projected real GDP growth in the long run is

somewhat below the historical average for the

United States because of an expected slow

down in the growth of the labor force as the

population ages

. Economic growth is expected

to average 2

. 5 percent in the long run, which

is unchanged from previous forecasts

.

ECONOMIC PROJECTIONS

Given the substantial amount of econom

ic turbulence that the country experienced

since the MSR economic projections were

finalized in June, this section also includes

an alternative projection that takes into ac

-

# 9 ECONOMIC ASSUMPTIONS



# count more recent data

. These more recent

data include both revised historical data for

the National Income and Product Accounts

(NIPA) released in July, and updated data on

current economic conditions and the outlook

that were not available in June

. T able 2 pres

ents a summary of the original projection in

June and, in the Addendum, the adjustments

to that original projection related to the

NIPA revision

. These adjustments generally

maintain the same quarterly growth rates

for GDP and incomes as the original forecast

but start from the revised historical levels

in 2011 Q1

. In other words, they adjust the

MSR forecast for the revisions to histori

cal data, but do not reflect how the outlook

might have changed as a result of the revi

sions or other more recent data

.

The alternative forecast, shown in Table 4,

is an update of the projection based on infor

mation available through late August

. Since

J une, there have been significant changes to

the economic outlook, including the annual

revision of the NIPA which showed a large

downward adjustment in growth in the first

quarter, a subsequent downward revision of

growth in the second quarter, and other eco

nomic indicators suggesting slower growth

than originally projected in the second

half

. In addition, the F ederal Open Market Committee (FOMC) statement in August

suggested that interest rates will remain at

their current low level for longer than had

previously been anticipated

.

Real Gross Domestic Product (GDP) and the

Unemployment Rate: Real GDP is expected to

rise by 2

. 8 percent during the four quarters of

2011 (2

. 4 percent in the adjusted forecast) and

to increase 3

. 2 percent in the four quarters of

2012

. The growth rate is projected to rise to

4

. 0 percent in 2013 and 2014

. Beyond 2014,

real GDP growth is projected to moderate as

the level of real GDP approaches its potential

. The growth rate is steady at 2

. 5 percent per

year in 2018-2021

.

The unemployment rate is projected to av

erage 8

. 8 percent in 2011, slightly below its

level in July

. Unemployment is projected to

decline slowly because of the moderate pace

of expected real GDP growth and because, as

labor market conditions improve, discouraged

workers rejoin the labor force, adding tem

porarily to unemployment

. W ith continued

growth, the unemployment rate is projected

to fall, but it is not projected to fall below 6

. 0

percent until 2016

. These projections reflect

the close relationship that has prevailed his

torically between changes in real GDP and

unemployment

.



# Table 2. ECONOMIC ASSUMPTIONS 1



# (Calendar years; dollar amounts in billions)

Actual Projections

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Gross Domestic Product

(GDP):

Levels, dollar amounts in

billions:

Current dollars

��������������������� 14,119 14,660 15,281 16,019 16,889 17,851 18,863 19,893 20,906 21,852 22,807 23,798 24,830

Constant (2005) dollars

������� 12,881 13,248 13,586 14,030 14,549 15,131 15,717 16,294 16,820 17,272 17,703 18,146 18,600

Price index (2005 = 100)

������ 109

. 6 110

. 7 112

. 5 114

. 2 116

. 1 118

. 0 120

. 0 122

. 1 124

. 3 126

. 5 128

. 8 131

. 1 133

. 5

Percent change, Q4/Q4:

Current dollars

��������������������� 0

. 6 4

. 2 4

. 6 4

. 8 5

. 7 5

. 8 5

. 6 5

. 4 4

. 8 4

. 4 4

. 4 4

. 3 4

. 3

Constant (2005) dollars

������� 0

. 2 2

. 8 2

. 8 3

. 2 4

. 0 4

. 0 3

. 8 3

. 6 3

. 0 2

. 5 2

. 5 2

. 5 2

. 5

Price index (2005 = 100)

������ 0

. 5 1

. 3 1

. 8 1

. 6 1

. 6 1

. 7 1

. 7 1

. 8 1

. 8 1

. 8 1

. 8 1

. 8 1

. 8

Percent change, year over year:

Current dollars

��������������������� –1

. 7 3

. 8 4

. 2 4

. 8 5

. 4 5

. 7 5

. 7 5

. 5 5

. 1 4

. 5 4

. 4 4

. 3 4

. 3

Constant (2005) dollars

������� –2

. 6 2

. 9 2

. 6 3

. 3 3

. 7 4

. 0 3

. 9 3

. 7 3

. 2 2

. 7 2

. 5 2

. 5 2

. 5

Price index (2005 = 100)

������ 0

. 9 1

. 0 1

. 6 1

. 5 1

. 7 1

. 6 1

. 7 1

. 7 1

. 8 1

. 8 1

. 8 1

. 8 1

. 8

Incomes, billions of current

dollars:

# 10 MID-SESSION REVIEW



# Table 2. ECONOMIC ASSUMPTIONS 1

— 

# Continued

(Calendar years; dollar amounts in billions)

Actual Projections

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Domestic corporate profits

��� 906 1,241 1,322 1,505 1,575 1,622 1,681 1,723 1,759 1,700 1,647 1,627 1,632

Employee compensation

������ 7,812 7,985 8,264 8,625 9,112 9,669 10,270 10,902 11,528 12,127 12,731 13,338 13,935

Wages and salaries

� �������������� 6,274 6,399 6,624 6,931 7,352 7,804 8,296 8,817 9,348 9,847 10,353 10,848 11,327

Other taxable income 2



# ���������� 3,206 3,264 3,427 3,563 3,753 3,973 4,187 4,423 4,673 4,898 5,108 5,305 5,496

Consumer Price Index (all

urban): 3



# Level (1982–84 = 100)

���������� 214

. 5 218

. 1 224

. 3 228

. 4 232

. 8 237

. 4 242

. 2 247

. 2 252

. 5 257

. 7 263

. 2 268

. 7 274

. 4

Percent change, Q4/Q4

��������� 1

. 4 1

. 2 2

. 8 1

. 9 1

. 9 2

. 0 2

. 0 2

. 1 2

. 1 2

. 1 2

. 1 2

. 1 2

. 1

Percent change, year/year

���� –0

. 3 1

. 6 2

. 8 1

. 8 1

. 9 2

. 0 2

. 0 2

. 1 2

. 1 2

. 1 2

. 1 2

. 1 2

. 1

Unemployment rate, civilian,

percent:

Fourth quarter level

������������� 10

. 0 9

. 6 8

. 6 8

. 2 7

. 4 6

. 7 6

. 0 5

. 5 5

. 2 5

. 2 5

. 2 5

. 2 5

. 2

Annual average

�������������������� 9

. 3 9

. 6 8

. 8 8

. 3 7

. 7 6

. 9 6

. 3 5

. 7 5

. 3 5

. 2 5

. 2 5

. 2 5

. 2

Federal pay raises, January,

percent:

Military 4



# �������������������������������� 3

. 9 3

. 4 1

. 4 1

. 6 NA NA NA NA NA NA NA NA NA

Civilian 5



# �������������������������������� 3

. 9 2

. 0 0

. 0 0

. 0 NA NA NA NA NA NA NA NA NA

Interest rates, percent:

91-day Treasury bills 6



# ���������� 0

. 2 0

. 1 0

. 1 0

. 5 1

. 8 3

. 2 3

. 8 4

. 0 4

. 1 4

. 1 4

. 1 4

. 1 4

. 1

10-year Treasury notes

�������� 3

. 3 3

. 2 3

. 4 3

. 8 4

. 3 4

. 7 5

. 0 5

. 2 5

. 3 5

. 3 5

. 3 5

. 3 5

. 3

ADDENDUM: 7



# Gross Domestic Product

(GDP), revised:

Levels, dollar amounts in

billions:

Current dollars

��������������������� 13,939 14,527 15,128 15,859 16,720 17,672 18,674 19,694 20,697 21,633 22,578 23,559 24,582

Constant (2005) dollars

������� 12,703 13,088 13,368 13,804 14,314 14,887 15,464 16,032 16,549 16,993 17,418 17,854 18,300

Price index (2005 = 100)

������ 109

. 7 111

. 0 113

. 2 114

. 9 116

. 8 118

. 7 120

. 7 122

. 8 125

. 0 127

. 3 129

. 6 131

. 9 134

. 3

Percent change, Q4/Q4:

Current dollars

��������������������� 0

. 0 4

. 7 4

. 4 4

. 8 5

. 7 5

. 8 5

. 6 5

. 4 4

. 8 4

. 4 4

. 4 4

. 3 4

. 3

Constant (2005) dollars

������� –0

. 5 3

. 1 2

. 4 3

. 2 4

. 0 4

. 0 3

. 8 3

. 6 3

. 0 2

. 5 2

. 5 2

. 5 2

. 5

Price index (2005 = 100)

������ 0

. 7 1

. 6 1

. 9 1

. 6 1

. 6 1

. 7 1

. 7 1

. 8 1

. 8 1

. 8 1

. 8 1

. 8 1

. 8

Percent change, year over year:

Current dollars

��������������������� –2

. 5 4

. 2 4

. 1 4

. 8 5

. 4 5

. 7 5

. 7 5

. 5 5

. 1 4

. 5 4

. 4 4

. 3 4

. 3

Constant (2005) dollars

������� –3

. 5 3

. 0 2

. 1 3

. 3 3

. 7 4

. 0 3

. 9 3

. 7 3

. 2 2

. 7 2

. 5 2

. 5 2

. 5

Price index (2005 = 100)

������ 1

. 1 1

. 2 1

. 9 1

. 5 1

. 7 1

. 6 1

. 7 1

. 7 1

. 8 1

. 8 1

. 8 1

. 8 1

. 8

Incomes, billions of current

dollars, revised:

Domestic corporate profits

��� 1,002 1,418 1,511 1,719 1,800 1,853 1,921 1,969 2,010 1,942 1,882 1,859 1,865

Employee compensation

������ 7,806 7,971 8,251 8,611 9,097 9,653 10,253 10,884 11,509 12,107 12,710 13,316 13,913

Wages and salaries

� �������������� 6,270 6,408 6,634 6,940 7,362 7,815 8,308 8,830 9,361 9,862 10,368 10,863 11,343

Other taxable income 2



# ���������� 2,955 3,108 3,266 3,396 3,573 3,777 3,980 4,201 4,432 4,638 4,828 5,008 5,182

NA = Not Available; Q4/Q4 = fourth quarter over fourth quarter

1 

# Based on information available as of June 2011

.

2 

# Rent, interest, dividend, and proprietors' income components of personal income

.

3 

# Seasonally adjusted CPI for all urban consumers

.

4 

# Percentages apply to basic pay only; percentages to be proposed for years after 2012 have not yet been determined

.

5 

# Overall average increase, including locality pay adjustments

. Percentages to be proposed for years after 2012 have not yet been de

termined

.

6 

# Average rate, secondary market (bank discount basis)

.

7 

# June assumptions adjusted for July 29, 2011 revisions to the National Income and Product Accounts

.

# 11 ECONOMIC ASSUMPTIONS



# Inflation: Consumer price inflation rose in

late 2010 and in the earlier part of this year

mainly because of a sharp rise in world oil

prices

. Rising food prices also contributed to

the increase

. Inflation has moderated since

then as oil prices have declined

. Core infla

tion, which excludes food and energy prices,

also rose, but much less dramatically than

the top-line measure

. As measured by the

CPI, core inflation was 1

. 8 percent between

July 2010 and July 2011; it had been only

0

. 9 percent over the preceding 12 months

. Looking ahead, core inflation is expected to

edge up somewhat as the economy recov

ers and unemployment declines

. In the long

run, the CPI inflation rate is projected to be

2

. 1 percent per year

. The other main mea

sure of inflation is the chained price index

for Gross Domestic Product

. Year-over-year

inflation by this measure is projected at 1

. 6

percent in 2011 (1

. 9 percent adjusted), 1

. 5

percent in 2012, and ultimately 1

. 8 percent

in 2017-2021

.

Interest Rates: The projections for interest

rates are based on financial market data as of

June, including market expectations at that

time

. Consequently , the forecast does not in

corporate the latest market data, the Federal

Reserve’s statement in August that short-term

rates would remain at their current low levels

through mid-2013, or the dramatic reduction

in long-term Treasury rates that occurred in

early August as a result of the “flight to qual

ity” caused by the crisis in Europe

. The MSR

forecast projects the three-month Treasury

bill rate to average 0

. 1 percent in 2011, which

is still likely to be true, but to begin rising

in 2012 and to reach 4

. 1 percent by 2017

. In light of the Federal Reserve’s statement,

the rise in rates in 2012 now seems unlike

ly

. Similar caveats hold for the projection of

long-term interest rates

. The yield on the 10-

year Treasury note is projected to average 3

. 4

percent in 2011 and to rise to 5

. 3 percent by

2017

. Now that long-term yields ha ve fallen

well below their June values, the forecast for

2011 appears to be too high

. In the later years

of the forecast, however, when interest rates

are expected to be close to their historical av

erages in real terms given the projected rate

of inflation there is no reason to believe the

forecast would change based on recent data

.

Incomes and Income Shares: Corporate

profits have rebounded more quickly than labor compensation (which consists of wages

and salaries and employee fringe benefits)

. As a result, corporate profits have risen as a

share of the economy over the past 12 quar

ters, while labor compensation as a share of

the economy has fallen below its long-run av

erage

. As the economy recovers, this situation

is expected to reverse

. Labor compensation is

projected to rise somewhat relative to the size

of the economy, while the share of corporate

profits is projected to fall

. The wage share,

excluding fringe benefits, is also expected to

recover from its recent low level in step with

the increase in compensation

.

FORECAST COMPARISONS

A comparison with the most recent

Congressional Budget Office (CBO), Blue

Chip, and FOMC forecasts is shown below in

Table 3

. F or 2011, the projected rate of real

GDP growth is above that of the Blue Chip

Consensus (an average of about 50 privatesector forecasts) although when the MSR

forecast was determined in June, the differ

ence was smaller

. The CBO forecast, which

was completed around the same time as the

Administration’s projections, is similar for

real GDP in 2011

. The FOMC forecast, which

also dates from June, is slightly higher, mainly

because the Administration updated its 2011

forecast for the revisions to the historical data

for GDP released in late July by the Bureau

of Economic Analysis

. Neither the FOMC nor

the CBO forecasts were adjusted for these

new data, which showed lower growth in the

first half of 2011

. The consensus forecast has

shifted down in the last two months

.

In 2012, real GDP growth (fourth quarter

over fourth quarter) is expected to be 3

. 2

percent, which is just below the June FOMC

central tendency of 3

. 3 to 3

. 7 percent, but it

is well above the latest Blue Chip consensus

of 2

. 7 percent, which is the same growth rate

that CBO projects for 2012

. In 2013, CBO

expects a relatively sharp slowdown in the

growth rate, because its current-law policy

assumptions imply that all of the 2001-2003

tax cuts will expire at the end of 2012

. In turn,

CBO expects a relatively rapid growth rate in

2014-2015

.

Looking further into the future, the

Administration expects the economy even

tually to recover much of the ground lost to

# 12 MID-SESSION REVIEW



# the 2008-2009 recession

. This will require

a phase of relatively rapid growth, which in

the current forecast is projected to occur in

2013-2016

. The FOMC anticipates a similar

catch-up

. While CBO also expects a catch-up

during this time frame, it is not as much as

the Administration or the FOMC is project

ing

. Meanwhile , the Blue Chip consensus ex

pects to make up relatively little of this lost

output

. This is a major difference in the fore

casts for real GDP

. All the forecasters have

a similar expectation for the long-run growth

rate, which is expected to be around 2-1/2 per

cent per year

.



# Table 3. COMP ARISON OF ECONOMIC ASSUMPTIONS

(Calendar years; dollar amounts in billions)

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Nominal GDP:

MSR

�������������������������������������������������� 14,527 15,128 15,859 16,720 17,672 18,674 19,694 20,697 21,633 22,578 23,559 24,582

Budget

� ���������������������������������������������� 14,651 15,240 16,032 17,006 18,043 19,052 20,037 20,986 21,910 22,866 23,860 24,896

CBO

� �������������������������������������������������� 14,660 15,238 15,817 16,301 17,261 18,406 19,333 20,260 21,183 22,140 23,096 24,082

Blue Chip

������������������������������������������ 14,527 15,079 15,727 16,560 17,438 18,327 19,225 20,148 21,095 22,087 23,125 24,212

Percent change, fourth quarter over fourth quarter

Real GDP:

MSR

�������������������������������������������������� 3

. 1 2

. 4 3

. 2 4

. 0 4

. 0 3

. 8 3

. 6 3

. 0 2

. 5 2

. 5 2

. 5 2

. 5

Budget

� ���������������������������������������������� 2

. 5 3

. 1 4

. 0 4

. 5 4

. 2 3

. 6 3

. 2 2

. 7 2

. 5 2

. 5 2

. 5 2

. 5

CBO

� �������������������������������������������������� 2

. 8 2

. 3 2

. 7 2013-2016 Average: 3

. 6 2017-2021 Average: 2

. 4

Blue Chip

������������������������������������������ 3

. 1 1

. 6 2

. 7

FOMC Central Tendency

����������������� 2

. 8 2

. 7–2

. 9 3

. 3–3

. 7 3

. 5–4

. 2 Longer Run Average: 2

. 5–2

. 8

Percent change, year over year

Real GDP:

MSR

�������������������������������������������������� 3

. 0 2

. 1 3

. 3 3

. 7 4

. 0 3

. 9 3

. 7 3

. 2 2

. 7 2

. 5 2

. 5 2

. 5

Budget

� ���������������������������������������������� 2

. 7 2

. 7 3

. 6 4

. 4 4

. 3 3

. 8 3

. 3 2

. 9 2

. 6 2

. 5 2

. 5 2

. 5

CBO

� �������������������������������������������������� 2

. 9 2

. 4 2

. 6 1

. 7 4

. 4 5

. 0 3

. 2 2

. 8 2

. 5 2

. 5 2

. 3 2

. 3

Blue Chip

������������������������������������������ 3

. 0 1

. 8 2

. 5 3

. 2 3

. 1 2

. 9 2

. 8 2

. 7 2

. 6 2

. 6 2

. 6 2

. 6

GDP price index:

MSR

�������������������������������������������������� 1

. 2 1

. 9 1

. 5 1

. 7 1

. 6 1

. 7 1

. 7 1

. 8 1

. 8 1

. 8 1

. 8 1

. 8

Budget

� ���������������������������������������������� 1

. 0 1

. 3 1

. 5 1

. 6 1

. 7 1

. 7 1

. 8 1

. 8 1

. 8 1

. 8 1

. 8 1

. 8

CBO

� �������������������������������������������������� 1

. 0 1

. 5 1

. 2 1

. 4 1

. 4 1

. 6 1

. 8 1

. 9 2

. 0 2

. 0 2

. 0 2

. 0

Blue Chip

������������������������������������������ 1

. 2 2

. 1 1

. 9 2

. 0 2

. 1 2

. 1 2

. 1 2

. 1 2

. 1 2

. 1 2

. 1 2

. 1

Consumer Price Index (CPI-U):

MSR

�������������������������������������������������� 1

. 6 2

. 8 1

. 8 1

. 9 2

. 0 2

. 0 2

. 1 2

. 1 2

. 1 2

. 1 2

. 1 2

. 1

Budget

� ���������������������������������������������� 1

. 6 1

. 3 1

. 8 1

. 9 2

. 0 2

. 0 2

. 1 2

. 1 2

. 1 2

. 1 2

. 1 2

. 1

CBO

� �������������������������������������������������� 1

. 6 2

. 9 1

. 5 1

. 3 1

. 3 1

. 8 2

. 1 2

. 3 2

. 3 2

. 3 2

. 3 2

. 3

Blue Chip

������������������������������������������ 1

. 6 3

. 0 2

. 2 2

. 3 2

. 4 2

. 4 2

. 4 2

. 4 2

. 4 2

. 4 2

. 4 2

. 4

Annual average in percent

Unemployment rate:

MSR

�������������������������������������������������� 9

. 6 8

. 8 8

. 3 7

. 7 6

. 9 6

. 3 5

. 7 5

. 3 5

. 2 5

. 2 5

. 2 5

. 2

Budget

� ���������������������������������������������� 9

. 6 9

. 3 8

. 6 7

. 5 6

. 6 5

. 9 5

. 5 5

. 3 5

. 3 5

. 3 5

. 3 5

. 3

CBO

� �������������������������������������������������� 9

. 6 9

. 4 8

. 4 7

. 6 6

. 8 5

. 9 5

. 3 5

. 3 5

. 2 5

. 2 5

. 2 5

. 2

Blue Chip

������������������������������������������ 9

. 6 9

. 0 8

. 7 7

. 5 6

. 8 6

. 3 6

. 0 5

. 8 5

. 6 5

. 6 5

. 6 5

. 6

FOMC Central Tendency 1



# ���������������� 9

. 6 8

. 6–8

. 9 7

. 8–8

. 2 7

. 0–7

. 5 Longer Run Average:5

. 2–5

. 6

91-day Treasury bills:

MSR

�������������������������������������������������� 0

. 1 0

. 1 0

. 5 1

. 8 3

. 2 3

. 8 4

. 0 4

. 1 4

. 1 4

. 1 4

. 1 4

. 1

Budget

� ���������������������������������������������� 0

. 1 0

. 2 0

. 9 2

. 6 3

. 7 4

. 0 4

. 1 4

. 1 4

. 1 4

. 1 4

. 1 4

. 1

CBO

� �������������������������������������������������� 0

. 1 0

. 1 0

. 1 0

. 2 0

. 8 1

. 9 3

. 2 4

. 0 4

. 0 4

. 0 4

. 0 4

. 0

Blue Chip

������������������������������������������ 0

. 1 0

. 1 0

. 5 2

. 9 3

. 6 3

. 8 3

. 9 4

. 0 3

. 9 3

. 9 3

. 9 3

. 9

10-year Treasury notes:

MSR

�������������������������������������������������� 3

. 2 3

. 4 3

. 8 4

. 3 4

. 7 5

. 0 5

. 2 5

. 3 5

. 3 5

. 3 5

. 3 5

. 3

# 13 ECONOMIC ASSUMPTIONS



# Table 3. COMP ARISON OF ECONOMIC ASSUMPTIONS —Continued

(Calendar years; dollar amounts in billions)

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Budget

� ���������������������������������������������� 3

. 2 3

. 0 3

. 6 4

. 2 4

. 6 4

. 9 5

. 2 5

. 3 5

. 3 5

. 3 5

. 3 5

. 3

CBO

� �������������������������������������������������� 3

. 2 3

. 3 3

. 2 3

. 3 3

. 8 4

. 3 4

. 9 5

. 3 5

. 3 5

. 3 5

. 3 5

. 3

Blue Chip

������������������������������������������ 3

. 2 3

. 2 3

. 6 4

. 9 5

. 2 5

. 4 5

. 4 5

. 4 5

. 4 5

. 4 5

. 4 5

. 4

MSR = Mid-Session Review (forecast date June 2011 adjusted for July 2011 National Income and Product Account revisions)

Budget = 2012 Budget (forecast date November 2010)

CBO = Congressional Budget Office (forecast date July 2011)

FOMC = Federal Reserve Open Market Committee (forecast central tendency, date June 2011)

Blue Chip = August 2011 Blue Chip Consensus Forecast extended with March 2011 Blue Chip long-run survey

Sources: Administration; CBO, The Budget and Economic Outlook: an Update, August 2011

FOMC, Minutes of the Federal Open Market Committee, June 21–22, 2011; Blue Chip Economic Indicators, March and August 2011,

Aspen Publishers

.

1 

# Fourth quarter levels of unemployment rate

.



# The Administration projects that unem

ployment will average 8

. 8 percent in 2011, 8

. 3

percent in 2012, and 7

. 7 percent in 2013

. CBO

expects unemployment to remain high for a

longer period

. It projects an unemployment

rate of 8

. 9 percent in 2011 and 8

. 7 percent

in 2012-2013

. The latest Blue Chip consen

sus is: 9

. 0 percent in 2011 and 8

. 7 percent in

2012

. The semiannual long-run extension of

the Blue Chip forecast was released in March

2011, and the next extension will not be avail

able until October

. In Marc h, the Blue Chip

had expected a larger decline in the unem

ployment rate, which can be seen in Table 3 in

the values shown for 2013 through 2021

. The

June FOMC projections also show unemploy

ment falling by more than the latest consen

sus projections

. In the long run, all of the fore

casts expect the unemployment rate to reach

a level of between 5 and 6 percent

.

The forecasts are similar for inflation and

interest rates

. All of the forecasters shown in

Table 3 expect inflation to rise to around 2

percent per year, which is close to the average

inflation rate of the past several years

. The

unusually low level of Federal interest rates

that has prevailed since the financial crisis is

also expected to end as real interest rates re

turn to near their historical averages but only

gradually over the next few years

. The recent

consensus expects a slower rise in interest

rates than was assumed a few months ago

.



# Table 4. AL TERNATIVE ECONOMIC FORECAST

Economic Assumptions

(Calendar years)

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Nominal GDP:

% Change, 4th/4th:

MSR

��������������������������������������������������������� 4

. 7 4

. 4 4

. 8 5

. 7 5

. 8 5

. 6 5

. 4 4

. 8 4

. 4 4

. 4 4

. 3 4

. 3

Alternative

���������������������������������������������� 4

. 7 3

. 6 4

. 5 5

. 5 5

. 8 6

. 0 5

. 8 5

. 4 4

. 3 4

. 3 4

. 3 4

. 3

% Change, Year/Year:

MSR

��������������������������������������������������������� 4

. 2 4

. 1 4

. 8 5

. 4 5

. 7 5

. 7 5

. 5 5

. 1 4

. 5 4

. 4 4

. 3 4

. 3

Alternative

���������������������������������������������� 4

. 2 3

. 7 4

. 1 5

. 3 5

. 6 5

. 9 5

. 9 5

. 6 4

. 7 4

. 3 4

. 3 4

. 3

Real GDP:

% Change, 4th/4th:

MSR

��������������������������������������������������������� 3

. 1 2

. 4 3

. 2 4

. 0 4

. 0 3

. 8 3

. 6 3

. 0 2

. 5 2

. 5 2

. 5 2

. 5

Alternative

���������������������������������������������� 3

. 1 1

. 6 2

. 9 3

. 8 4

. 0 4

. 2 4

. 0 3

. 6 2

. 5 2

. 5 2

. 5 2

. 5

% Change, Year/Year:

MSR

��������������������������������������������������������� 3

. 0 2

. 1 3

. 3 3

. 7 4

. 0 3

. 9 3

. 7 3

. 2 2

. 7 2

. 5 2

. 5 2

. 5

Alternative

���������������������������������������������� 3

. 0 1

. 7 2

. 6 3

. 5 3

. 9 4

. 1 4

. 1 3

. 7 2

. 9 2

. 5 2

. 5 2

. 5

# 14 MID-SESSION REVIEW



# Table 4. AL TERNATIVE ECONOMIC FORECAST —Continued

Economic Assumptions

(Calendar years)

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Unemployment Rate:

MSR

��������������������������������������������������������� 9

. 6 8

. 8 8

. 3 7

. 7 6

. 9 6

. 3 5

. 7 5

. 3 5

. 2 5

. 2 5

. 2 5

. 2

Alternative

���������������������������������������������� 9

. 6 9

. 1 9

. 0 8

. 5 7

. 8 7

. 0 6

. 1 5

. 5 5

. 2 5

. 2 5

. 2 5

. 2

Interest Rates:

91-Day Treasury Bills:

MSR

��������������������������������������������������������� 0

. 1 0

. 1 0

. 5 1

. 8 3

. 2 3

. 9 4

. 0 4

. 1 4

. 1 4

. 1 4

. 1 4

. 1

Alternative

���������������������������������������������� 0

. 1 0

. 1 0

. 1 0

. 4 2

. 3 3

. 8 4

. 0 4

. 1 4

. 1 4

. 1 4

. 1 4

. 1

10-Year Treasury Notes:

MSR

��������������������������������������������������������� 3

. 2 3

. 4 3

. 8 4

. 3 4

. 7 5

. 0 5

. 2 5

. 3 5

. 3 5

. 3 5

. 3 5

. 3

Alternative

���������������������������������������������� 3

. 2 3

. 0 3

. 3 3

. 9 4

. 6 5

. 0 5

. 2 5

. 3 5

. 3 5

. 3 5

. 3 5

. 3



# Budget Effects of Alternative Forecast Relative to MSR

(Fiscal years; in billions of dollars)

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012-

2016 2012-

2021

Receipt changes

������������������������������������������������ –9 –30 –55 –60 –50 –34 –14 –2 –2 –2 –2 –229 –250

Outlay changes:

Unemployment

������������������������������������������� 2 12 17 22 23 19 12 2 * * * 93 108

Net interest (rates)

� ������������������������������������ 2 –14 –43 –54 –38 –26 –23 –20 –18 –17 –16 –175 –270

All other, including debt service

���������������� * –1 * 4 9 12 14 14 13 13 13 24 91

Total outlay changes

����������������������������� 4 –2 –27 –28 –7 5 2 –4 –5 –3 –3 –58 –71

Deficit increase (–)

�������������������������������������������� –13 –28 –28 –32 –43 –39 –17 2 3 1 1 –170 –180

* $500 million or less

.

# 15 

# RECEIPTS

The Mid-Session Review (MSR) estimates

of receipts exceed the February Budget es

timates by $141 billion in 2011 and by $46

billion in 2012

. In each subsequent year

, the MSR estimates of receipts are below the

February Budget estimates, resulting in a net

decrease in receipts of $882 billion over the

10-year budget horizon (2012 through 2021)

. The net increase in 2011 receipts is in large

part attributable to the effect of technical re

visions based on new tax reporting data, col

lections to date, and other information as well

as to revised economic assumptions

. The net

increase in 2012 receipts is primarily attrib

utable to technical revisions and revisions in

the estimates of expiring provisions extended

in the adjusted baseline, which increase re

ceipts by $51 billion and $16 billion, respec

tively

. These increases are partially offset by

a $19 billion reduction in receipts attributable

to moving the February Budget proposals to

the MSR’s deficit reduction allowance

. The net

reduction in receipts of $882 billion over the

10-year budget horizon is primarily due to a

receipt loss of $828 billion that results from

moving the February Budget proposals to the

deficit reduction allowance

. The remainder of

the decrease is due largely to a receipt loss of

$394 billion attributable to revisions in the

economic forecast, partially offset by a receipt

increase of $283 billion attributable to techni

cal revisions

. Over the 10-year budget horizon,

enacted legislation and administrative actions

reduce receipts by $8 billion and revisions in

the estimates of expiring provisions extended

in the February adjusted baseline increase re

ceipts by $64 billion

.

ENACTED LEGISLATION AND

ADMINISTRATIVE ACTIONS

Changes that have resulted from enacted

legislation and administrative actions reduce

receipts from the February Budget by $1 bil

lion in 2011, have a negligible effect in 2012,

and reduce receipts by $8 billion over the 10-

year budget horizon

. The bulk of this reduc

tion in receipts is due to the Comprehensive

1099 Taxpayer Protection and Repayment of

Exchange Subsidy Overpayments Act of 2011,

which repealed certain information reporting

requirements for tax purposes and modified the limitation on repayment of advance pre

mium assistance credits for coverage under

a qualified health plan

. Other legislated tax

changes and administrative actions included

repeal of the Free Choice Voucher program

in the Department of Defense and Full-Year

Continuing Appropriations Act, and a threemonth extension of the due date for filing the

Federal highway use tax return

.

REVISIONS IN EXPIRING PROVISIONS

EXTENDED IN THE ADJUSTED BASELINE

The February adjusted baseline permanent

ly continued the 2001 and 2003 tax cuts for

middle-income taxpayers; permanently con

tinued estate, gift, and generation-skipping

transfer taxes at 2009 parameters; and reflect

ed permanent extension of relief from the AMT

. A reduction in the estimated cost of extending

these expiring provisions increases receipts

by $16 billion in 2012 and $64 billion over 10

years

. 1 

# The lower cost of extending these provi

sions is due in large part to reductions in the

economic forecast for wages and salaries and

revisions to models of receipts, which were reestimated using current collection experience

and updated tax data for prior years

.

ECONOMIC CHANGES

Revisions to the economic forecast increase

receipts by $19 billion in 2011, reduce receipts

by $2 billion in 2012, and reduce receipts in

each subsequent year, for a total reduction of

$394 billion over the 10 years beginning in

2012 and running through 2021

. In 2011, revi

sions to the economic forecast have the great

est effect on individual and corporation income

taxes, increasing those sources of receipts by

$10 billion and $7 billion, respectively

. The in

crease in 2011 individual income tax receipts

1 

# The adjusted baseline for the Mid-Session Review

also includes extensions of the 2001 and 2003 tax

cuts for high-income taxpayers and extension of

estate tax relief at current parameters, which are

more generous than the parameters in effect in 2009.

The Mid-Session Review proposes to allow these

provisions to expire, and therefore these provisions

do not affect the Mid-Session Review policy receipt

levels.

# 16 MID-SESSION REVIEW



# is primarily attributable to increases in the

forecasts of wages and salaries and nonwage

sources of personal income

. Changes in the

forecast of GDP and other economic measures

that affect the profitability of corporations

largely account for the increase in 2011 corpo

ration income tax collections

.

Over the 10-year budget horizon, revisions

in the economic forecast have the greatest

effect on individual income taxes and social

insurance and retirement receipts, reducing

collections by $283 billion and $173 billion,

respectively

. Reductions in the economic fore

cast for wages and salaries account for most of

the downward revision in individual income

tax collections over the period

. Wages and

salaries and proprietor’s income are the tax

base for Social Security and Medicare payroll

taxes, the largest component of social insur

ance and retirement receipts

. Reductions in

Social Security and Medicare payroll taxes,

which are the net effect of reductions in the

forecast of wages and salaries and increases

in the forecast of proprietor’s income, account

for most of the 10-year reduction in social in

surance and retirement receipts

.

The reductions in individual income taxes

and social insurance and retirement receipts

are partially offset by increases in customs

duties of $28 billion, due to increases in the

forecast of imports, and increases in deposits

of earnings of the Federal Reserve System

of $26 billion, due to changes in the forecast

of interest rates

. Revisions in the forecast of

GDP and other sources of income increase

other sources of receipts (corporation income taxes, excise taxes, and estate and gift taxes)

by a net $9 billion

.

TECHNICAL CHANGES

Technical revisions in the estimates in

crease receipts by $122 billion in 2011, $51

billion in 2012, and $18 billion to $34 billion

in each subsequent year, for an increase of

$283 billion over the 10-year budget horizon

. The net increase in receipts in each year is

primarily due to upward re-estimates of indi

vidual income taxes, which are only partially

offset by downward re-estimates of corpora

tion income taxes and social insurance and re

tirement receipts

. The technical revisions in

both individual and corporation income taxes

are in large part attributable to more recent

collections data and revisions in the tax mod

els based primarily on updated tax data for

prior years

. More recent taxable wage data

from employer returns accounts for most of

the technical revision in social insurance and

retirement receipts

.

PRESENTATION OF PROPOSALS

Net of legislative proposals that were enact

ed, the February Budget included proposals

estimated to reduce receipts by $1 billion in

2011, increase receipts by $19 billion in 2012,

and increase receipts in each subsequent

year, resulting in a net increase in receipts of

$828 billion over the 10-year budget horizon

. Shifting these proposals to the Mid-Session

Review’s deficit reduction allowance reduces

receipts by an equivalent amount over the 10-

year budget window but has no effect on the

deficit

.

# 17 RECEIPTS



# Table 5. CHANGE IN RECEIPTS

(I n billions of dollars)

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012-

2016 2012-

2021

February Budget estimate

.......................... 2,174 2,627 3,003 3,333 3,583 3,819 4,042 4,257 4,473 4,686 4,923

Changes due to enacted legislation and

administrative actions

��������������������������������� –1 * –1 –1 –1 –1 –1 –1 –1 –1 –1 –3 –8

Changes due to economic and technical

revisions in provisions extended in the

adjusted baseline

� ����������������������������������������� * 16 –1 5 6 7 6 6 6 7 7 32 64

Changes due to revised economic

assumptions:

Individual income taxes

������������������������������� 10 –13 –26 –39 –37 –34 –29 –27 –28 –26 –25 –149 –283

Corporation income taxes

���������������������������� 7 12 8 4 1 –2 –3 –2 –3 –7 –10 24 –1

Social insurance and retirement receipts

��� –1 –10 –16 –22 –23 –21 –17 –17 –17 –15 –15 –93 –173

Customs duties

��������������������������������������������� 1 2 3 3 3 3 3 3 3 3 2 14 28

Deposit of earnings, Federal Reserve

System

������������������������������������������������������ 2 7 8 4 2 1 1 1 1 1 1 21 26

Other

������������������������������������������������������������� –* * * * * 1 1 2 2 2 2 1 10

Total changes due to revised economic

assumptions

��������������������������������������� 19 –2 –23 –50 –54 –52 –44 –41 –42 –42 –44 –181 –394

Changes due to technical re-estimates:

Individual income taxes

������������������������������� 123 62 30 35 36 36 35 31 29 29 34 199 356

Corporation income taxes

���������������������������� –11 –6 3 –1 –8 –5 –8 –8 –7 –6 –5 –17 –51

Social insurance and retirement receipts

��� 9 –3 –* –2 –4 –5 –6 –8 –7 –6 –8 –13 –48

Other

������������������������������������������������������������� 1 –3 –1 2 2 –1 * 3 6 8 9 –* 26

Total changes due to technical reestimates

�������������������������������������������� 122 51 31 34 27 26 20 18 22 25 30 168 283

Changes due to moving the February Budget

proposals to the deficit reduction allowance

��� 1 –19 –45 –28 –97 –141 –101 –100 –88 –104 –104 –331 –828

Total change in receipts

��������������� 141 46 –39 –40 –119 –162 –119 –117 –103 –115 –112 –315 –882

Mid-Session estimate

................................... 2,314 2,674 2,964 3,292 3,464 3,657 3,923 4,140 4,370 4,571 4,811

* $500 million or less

.

# 19 

# EXPENDITURES

Outlays for 2011 are now estimated to be

$3

. 630 trillion, $189 billion lower than the

February Budget estimate, due largely to

reduced appropriations in the Department

of Defense and Full-Year Continuing

Appropriations Act as well as slower-thanexpected spending in a number of programs,

including veterans benefits and the purchas

es of GSE preferred stock

. Relative to the

February Budget, total outlays have decreased

by $59 billion in 2012 and by $832 billion over

10 years

. These c hanges are largely the ef

fect of the caps on future discretionary budget

authority enacted in the Budget Control Act

of 2011 (BCA)

.

POLICY CHANGES

Changes due to Enacted Legislation

Legislation enacted since the release of the

February Budget has had a sizable, downward

impact on outlays in 2011, decreasing spend

ing by $51 billion

. Over the subsequent 10

years, 2012 through 2021, enacted legislation

reduces outlays by $997 billion

. The largest of

these changes is the enactment of the BCA

.

Budget Control Act of 2011. The BCA, en

acted on August 2, authorized increases in the

debt ceiling and included a number of provi

sions that will reduce budget deficits over the

next 10 years

. Reflecting the caps on discre

tionary budget authority enacted in the BCA

in the 2012 MSR reduces spending relative to

the February Budget by $740 billion over the

next 10 years

. Additional provisions in the

BCA related to program integrity initiatives

and higher education financial assistance fur

ther reduce spending since the Budget over

10 years by $13 billion

.

Full-year Appropriations for Fiscal

Year 2011. The Department of Defense and

Full-Year Continuing Appropriations Act, en

acted in April, provided final appropriations

for the Department of Defense and extended

the continuing resolution funding non-defense

programs to the end of 2011 at reduced levels

. Relative to the February Budget, it reduced

outlays by $51 billion in the current year, and is projected to reduce outlays by an additional

$49 billion from 2012 to 2021

.

Changes in Administration Policy

The BCA also created the Joint Select

Committee on Deficit Reduction, which is

charged with recommending legislation by

November 23, 2011 to produce an additional

$1

. 5 trillion in deficit reduction over the next

10 years

. As a placeholder for the recom

mendations of the Joint Committee, the MSR

includes an allowance for deficit reduction

equaling the Joint Committee’s $1

. 5 trillion

target

. The Administration maintains its

support for the specific mandatory and receipt

proposals included in the February Budget,

as shown in Summary Table S-9 of the MSR,

“Mandatory and Receipt Proposals from the

February Budget

. ” The estimates for the

MSR shift the presentation of these propos

als, along with their associated debt service

savings, into the Joint Committee allowance

to assume compliance with the requirements

of the BCA

. Removing the February manda

tory proposals and debt service from the MSR

outlay totals reduces spending in the MSR

relative to the February Budget by $18 billion

in 2011 but increases spending by $171 billion

over the subsequent 10 years

.

The MSR also reflects the Administration’s

strengthened commitment to permanent, fis

cally responsible reform to Medicare physician

payment rates

. It affirms the Administration’ s commitment to permanent reform by includ

ing in the adjusted baseline the expected

costs of a zero percent update throughout the

10-year budget window, instead of the large

cuts under current law

.

ESTIMATING CHANGES

Estimating changes are due to factors other

than enacted legislation or changes in policy,

including changes in economic assumptions,

discussed earlier in this Review, and changes

in technical factors

. Relative to the Budget

estimate, economic and technical changes de

crease estimated outlays for 2011 by $120 bil

-

# 20 MID-SESSION REVIEW



# lion while reducing outlays by $6 billion from

2012 through 2021

.

Discretionary appropriations. Outlays

for discretionary appropriations fall by $58

billion in 2011 and increase by $6 billion over

the next 10 years relative to the Budget as

a result of technical revisions

. These chang

es reflect lower outlays in 2011 compared to

the February Budget for both security and

non-security discretionary programs

. The

Departments of Defense, Education, Energy,

and Homeland Security show significantly

lower outlays in 2011 than projected in the

Budget due to technical revisions

. Over the

next 10 years, spending for security programs

rises by $51 billion, which is offset by decreas

es in non-security related programs of $45 bil

lion from 2012 through 2021

.

Refundable Tax Credits. Changes in

technical assumptions increase estimated

outlays for refundable tax credits by $8 bil

lion in 2011 and by $133 billion over the 10-

year period

. Refundable tax credits are paid

out as outlays when the amount of the credit

exceeds a taxpayer’s income tax liability; the

remaining portion of the credits is recorded as

reductions in tax receipts

. Most of this im

pact is the result of changes to estimates of

the premium assistance and earned income

tax credits

. T echnical changes to the models

used by Treasury to estimate these programs

resulted in more low-income filers being pro

jected to claim these credits

.

Unemployment compensation. Changes

in economic and technical assumptions de

crease outlays for unemployment benefits by

$11 billion in 2011 and $17 billion in 2012

. Over the 10-year period of 2012 through 2021,

outlays are down by $117 billion relative to

the February Budget estimate

. The reduction

is driven by a lower-than-expected insured

unemployment rate as well as a decline in

the average weekly unemployment benefit

.Additional technical changes arise from a respecification of the estimating equations used

in the Department of Labor’s unemployment

model

.

Social Security. Estimating changes re

duce outlays for Social Security by $1 billion

in 2011 but increase outlays by $112 billion

over the next 10 years

. Spending increases

in both the Old Age and Survivors Insurance (OASI) and Disability Insurance (DI) pro

grams are largely due to higher cost-of-living

adjustments (COLAs) starting in 2012 than

were assumed in the February Budget

. These

economic changes are further amplified by in

creases in outlays due to lower projected mor

tality rates for persons ages 65 and older and

revised estimates of the effects of the reces

sion on disability incidence

.

Medicaid. Projected Federal outlays for

Medicaid decrease by $3 billion in 2011 and

by $98 billion over 10 years relative to the

February Budget estimates

. The decrease

stems primarily from slower-than-expected

growth in benefits paid since February as

well as slower projected growth in the mar

ket basket and price indices used to calculate

Medicaid benefits relative to the February

Budget

.

Supplemental Nutrition Assistance

Program (SNAP). Outlays for SNAP in

crease by $62 billion over the next 10 years

due to economic and technical factors

. The

economic changes arise from a higher partici

pation rate than was assumed in the Budget,

as well as a higher cost of food in the Thrifty

Food Plan

. T echnical changes to the SNAP

model as well as a correction for spending of

two-year contingency funding that was inad

vertently omitted from the February Budget

also contribute to the increases

.

Foreign military sales. Technical chang

es decrease spending related to the Foreign

Military Sales Trust Fund by $20 billion over

the next 10 years

. The decrease can be attrib

uted to an overhaul of the Defense Security

Cooperation Agency projection model to now

include statistical methods that will reduce

volatility in future projections in the sales of

U

. S

. defense equipment and services

.

Purchases of GSE preferred stock. Lower

draws requested by Fannie Mae and Freddie

Mac from Treasury in 2011 under the Preferred

Stock Purchase Agreement, net of dividends,

resulted in $25 billion lower projected outlays

than in the February Budget

. The gross draws

projected in February were $47 billion

. Based

on these draws, $17 billion of dividends were

projected, resulting in net draws of $30 billion

. The actual gross draws paid were $21 billion

and the actual dividends were $16 billion, re

sulting in actual net draws of $5 billion

.

# 21 EXPENDITURES



# Veterans benefits. Estimating changes

reduce 2011 outlays for veterans compensa

tion and pensions and readjustment benefits

by $10 billion relative to the Budget, but in

crease outlays by $24 billion over the next 10

years

. Actual experience with Agent Orange

payments since February resulted in the low

er outlay estimate for 2011

. Part of the re

duction in 2011 was for retroactive payments

which are now expected to be paid in 2012

. The increases beyond 2011 are also due to

higher participation and average tuition costs

in veterans education programs as well as

higher COLAs leading to higher costs in 2012

and beyond in the veterans compensation and

pension program

.

Civilian and military retirement.

Economic changes comprise the majority of

the increase of $21 billion over 10 years in

spending relative to the Budget for civilian

and military retirement

. The COLA of 2

. 8

percent now projected for 2012, up from the

0

. 9 percent COLA assumed in February, led

to the majority of the increases for both civil

ian and military retirement programs

. Small

COLA decreases in the period from 2013 to

2016 offset the increase somewhat, but not

enough to counteract the 2012 increase and

the effect of the increase on all of the ensuing

years

.

Medicare. Estimating changes reduce out

lays for Medicare by $4 billion in 2011 and by

$4 billion over the next 10 years, most notably in the earlier years of the period

. Medicare

Part A and D both increase over the next 10

years, with this increase more than offset by

reductions in Part B

. The main cause of the

spending increase in Part A is higher estimat

ed payment updates for providers mainly due

to lower estimated labor productivity

. Part

D spending increases are due to use of more

recent data and refined estimates for certain

populations

. New population projections led

to higher enrollment projections in all three

programs, which also contributed to the in

creases for Medicare Part A and D

. The re

duction in Part B spending is due to a lower

estimate relative to the Budget of costs relat

ed to permanently overriding the reduction in

Medicare physician payments dictated by the

Sustainable Growth Rate (SGR) formula

.

Net interest. Excluding the debt service

associated with enacted legislation and policy

changes, outlays for net interest are project

ed to increase from February by $10 billion in

2011, but to decrease from February by $140

billion over the subsequent 10 years

. The in

crease in 2011 is due primarily to higher out

lays for inflated-indexed Treasury securities,

driven by higher-than-expected growth in the

Consumer Price Index

. The reductions in

subsequent years are virtually all due to the

effect of lower short- and long-term Treasury

interest rates over the next few years of the

revised MSR economic forecast, partially off

set by increased debt service due to estimat

ing changes in receipts and outlays

.

# 22 MID-SESSION REVIEW



# Table 6. CHANGE IN OUTLAYS

(I n billions of dollars)

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012-

2016 2012-

2021

February estimate

.......................................... 3,819 3,729 3,771 3,977 4,190 4,468 4,669 4,876 5,154 5,422 5,697

Changes due to enacted legislation:

Budget Control Act of 2011

���������������������� –* –32 –51 –72 –75 –79 –82 –87 –89 –95 –90 –309 –753

2011 full-year appropriations

������������������� –51 –21 –6 –3 –2 –2 –2 –2 –3 –4 –4 –35 –49

Other legislation

��������������������������������������� * –* * –* –* –* –1 –1 –1 –1 –1 –1 –4

Debt service

����������������������������������������������� –* –* –2 –6 –11 –16 –21 –26 –31 –36 –42 –35 –190

Subtotal, enacted legislation

�������������������������� –51 –53 –59 –81 –89 –97 –106 –116 –124 –136 –136 –379 –997

Changes due to reestimates:

Discretionary appropriations:

Security

��������������������������������������������������� –56 4 26 14 2 1 * 1 1 1 1 48 51

Non-security

�������������������������������������������� –2 9 –4 –6 –3 –6 –6 –8 –7 –6 –7 –11 –45

Refundable tax credits

����������������������������� 8 6 7 10 14 16 16 15 16 16 17 53 133

Unemployment compensation

����������������� –11 –17 –14 –11 –10 –10 –10 –11 –11 –11 –12 –62 –117

Social Security

������������������������������������������� –1 9 11 12 13 13 13 12 11 10 8 59 112

Medicaid

��������������������������������������������������� –3 –3 –3 –6 –8 –10 –10 –12 –13 –14 –19 –29 –98

Supplemental Nutrition Assistance

Program

������������������������������������������������ * 5 3 4 7 8 8 8 7 5 7 28 62

Foreign Military Sales Trust Fund

���������� –* –1 1 1 * –1 –4 –4 –4 –4 –5 * –20

Purchases of GSE preferred stock

������������ –25

......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... Veterans benefits

��������������������������������������� –10 3 2 2 2 2 2 2 3 3 2 11 24

Civilian and military retirement

������������� –* 2 2 2 2 2 2 2 2 2 2 10 21

Medicare

���������������������������������������������������� –4 –8 –6 –5 –4 –3 2 3 4 4 8 –25 –4

Other programs

���������������������������������������� –26 7 6 2 2 1 –* –* –* –2 * 18 15

Net interest 1



# ��������������������������������������������� 10 –5 –23 –29 –13 –11 –8 –9 –12 –13 –16 –81 –140

Subtotal, reestimates

������������������������������������� –120 11 9 –8 4 2 4 –* –4 –11 –13 18 –6

Change due to moving the February

Budget proposals to the deficit reduction

allowance 2



# ��������������������������������������������������� –18 –17 –27 2 18 18 21 26 33 43 55 –6 171

Total change in outlays

�������������������������������������� –189 –59 –78 –87 –67 –77 –81 –91 –95 –104 –94 –367 –832

Mid-Session estimate

..................................... 3,630 3,670 3,693 3,891 4,123 4,391 4,588 4,785 5,060 5,317 5,603

*$500 million or less

.

1 

# Includes debt service on all reestimates

2 

# Includes debt service

.

# 23 

# SUMMARY TABLES

# 24 MID-SESSION REVIEWTableS–1.BUDGET TOTALS(In billions of dollars and as a percent of GDP)201020112012201320142015201620172018201920202021Totals2012–20162012–2021Budget Totals in Billions of Dollars:Receipts�����������������������������������������������������������������2,1632,3142,6742,9643,2923,4643,6573,9234,1404,3704,5714,81116,05037,865Outlays������������������������������������������������������������������3,4563,6303,6703,6933,8914,1234,3914,5884,7855,0605,3175,60319,76745,120Allowance for Joint Committee deficitreduction target�������������������������������������������������..................–40–81–125–138–151–165–178–192–206–223–536–1,500Deficit����������������������������������������������������������������1,2931,3169566484735215835014674985405683,1815,755Debt held by the public�����������������������������������������9,01910,26411,30712,12612,74913,41114,12114,72615,28815,86916,48917,137Debt net of financial assets����������������������������������7,8949,19410,13010,76911,24211,76212,34512,84513,31213,81014,35014,918Gross domestic product (GDP)���������������������������������14,36014,96615,67316,49017,42618,42319,43520,45321,40422,33923,31024,322Budget Totals as a Percent of GDP:Receipts�����������������������������������������������������������������15.1%15.5%17.1%18.0%18.9%18.8%18.8%19.2%19.3%19.6%19.6%19.8%18.3%18.9%Outlays������������������������������������������������������������������24.1%24.3%23.4%22.4%22.3%22.4%22.6%22.4%22.4%22.7%22.8%23.0%22.6%22.6%Allowance for Joint Committee deficit reductiontarget�����������������������������������������������������������������..................–0.3%–0.5%–0.7%–0.8%–0.8%–0.8%–0.8%–0.9%–0.9%–0.9%–0.6%–0.7%Deficit����������������������������������������������������������������9.0%8.8%6.1%3.9%2.7%2.8%3.0%2.4%2.2%2.2%2.3%2.3%3.7%3.0%Debt held by the public�����������������������������������������62.8%68.6%72.1%73.5%73.2%72.8%72.7%72.0%71.4%71.0%70.7%70.5%Debt net of financial assets����������������������������������55.0%61.4%64.6%65.3%64.5%63.8%63.5%62.8%62.2%61.8%61.6%61.3%

# 25 SUMMARY TABLESTableS–2.EFFECT OF BUDGET PROPOSALS ON PROJECTED DEFICITS(Deficit increases (+) or decreases (–) in billions of dollars)20112012201320142015201620172018201920202021Totals2012–20162012–2021Projected deficits in the adjusted baseline1...........1,3161,0338557728689729289309981,0791,1514,5009,586Percent of GDP�������������������������������������������������������������8.8%6.6%5.2%4.4%4.7%5.0%4.5%4.3%4.5%4.6%4.7%5.2%4.9%Deficit reduction proposals:Joint Committee deficit reduction target:Programmatic changes�������������������������������������������.........–40–80–120–126–132–138–144–150–155–163–498–1,247Debt service�������������������������������������������������������������.........–*–1–5–12–19–27–34–42–51–60–38–253Total, Joint Committee deficit reduction target�����.........–40–81–125–138–151–165–178–192–206–223–536–1,500Overseas contingency operations (OCO):Reductions in OCO funding������������������������������������.........–24–78–103–115–120–123–126–129–132–135–439–1,084Debt service�������������������������������������������������������������.........–*–1–5–11–17–24–30–37–45–53–33–221Total, overseas contingency operations���������������.........–24–79–108–126–136–146–156–166–177–188–472–1,305Expiration of high-income tax cuts:Restore high-income tax rates to current law�������.........–13–47–54–67–79–88–94–100–106–112–260–760Return estate tax relief to 2009 parameters���������–*–*–*–9–10–11–13–14–15–16–18–31–106Debt service�������������������������������������������������������������–*–*–1–3–7–11–16–21–27–34–41–21–160Total, expiration of high-income tax cuts�����������–*–13–47–66–84–101–117–129–142–156–171–311–1,026Total deficit reduction................................................–*–76–207–299–347–389–428–463–500–539–582–1,319–3,831Resulting deficits in 2012 Mid-Session Review.....1,3169566484735215835014674985405683,1815,755Percent of GDP�������������������������������������������������������������8.8%6.1%3.9%2.7%2.8%3.0%2.4%2.2%2.2%2.3%2.3%3.7%3.0%Memorandum:Resulting deficit levels if high-income tax cuts arenot allowed to expire������������������������������������������������1,3169696955396046846175966406967403,4926,781Percent of GDP��������������������������������������������������������8.8%6.2%4.2%3.1%3.3%3.5%3.0%2.8%2.9%3.0%3.0%4.1%3.5%* $500 million or less.1See Tables S-3 and S-7 for information on the adjusted baseline.

# 26 MID-SESSION REVIEWTableS–3.ADJUSTED BASELINE BY CATEGORY1(In billions of dollars)201020112012201320142015201620172018201920202021Totals2012–20162012–2021Outlays:Appropriated (“discretionary”) programs:2Security���������������������������������������������������8168358838838748758879039229429629824,4029,114Non-security������������������������������������������4904774403943843873893944014104194271,9934,044Subtotal, appropriated programs�������1,3061,3121,3241,2771,2581,2621,2761,2971,3231,3521,3811,4106,39613,158Mandatory programs:Social Security����������������������������������������7017267688138589079591,0151,0741,1381,2061,2784,30510,015Medicare�������������������������������������������������4464844785245545806316546787387948522,7666,482Medicaid�������������������������������������������������2732732662853483864214514805145475861,7054,284Troubled Asset Relief Program (TARP)3���–110–3817126521***.........4243Other mandatory programs�������������������6446576025595796166686716747137377793,0246,598Subtotal, mandatory programs����������1,9542,1022,1322,1922,3442,4932,6812,7912,9073,1033,2843,49511,84327,422Net interest�������������������������������������������������1962162352973914915726537227898539171,9865,920Adjustments to reflect possibleemergencies4�������������������������������������������.........13789910101010103686Total outlays�������������������������������������������3,4563,6303,6943,7734,0014,2554,5384,7504,9635,2535,5285,83120,26046,585Receipts:Individual income taxes������������������������������8991,0891,1961,2941,4371,5661,6941,8221,9452,0642,1852,3077,18717,511Corporation income taxes���������������������������1911943334084814293964514554674664872,0454,372Social insurance and retirement receipts:Social Security payroll taxes����������������6325646517217628048619089581,0071,0511,1043,8008,827Medicare payroll taxes��������������������������1801882002152322462642792943093233401,1562,700Unemployment insurance���������������������455555596264656159616061305608Other retirement������������������������������������888889999910104389Excise taxes�������������������������������������������������67707987971021041081151281341404691,094Estate and gift taxes�����������������������������������1971213151617181921222373176Customs duties��������������������������������������������253034373942434648515355195448Deposits of earnings, Federal ReserveSystem�����������������������������������������������������768673554440394347505354252499Other miscellaneous receipts���������������������212219195269747882879399235674Total receipts������������������������������������������2,1632,3142,6612,9183,2293,3873,5663,8224,0324,2554,4494,68115,76036,999Deficit.............................................................1,2931,3161,0338557728689729289309981,0791,1514,5009,586Net interest�������������������������������������������������1962162352973914915726537227898539171,9865,920Primary deficit.........................................1,0971,1007985573813784002752082092252342,5143,666On-budget deficit�����������������������������������������1,3701,3771,0989188369321,0501,0081,0121,0761,1441,2084,83410,282Off-budget surplus (–)���������������������������������–77–62–65–63–63–64–78–79–82–78–65–57–334–695

# 27 SUMMARY TABLESTableS–3. ADJUSTED BASELINE BY CATEGORY—Continued(In billions of dollars)201020112012201320142015201620172018201920202021Totals2012–20162012–2021Memorandum, budget authority for appropriated programs:2Security��������������������������������������������������������8578478458508658818979179369569769974,3389,119Non-security�����������������������������������������������4013703603623693773843924014104194281,8523,901Total, appropriated funding�������������������1,2581,2181,2051,2121,2341,2571,2811,3081,3371,3661,3951,4256,19013,021* $500 million or less.1See Table S–7 for information on adjustments to the Budget Enforcement Act (BEA) baseline.2Discretionary spending levels other than overseas contingency operations reflect the budget authority caps under the BudgetControl Act of 2011.The split of discretionary spending between security and non-security after 2013 is based on increasing budget authority in each category by the growth rate in the aggregate discretionarycap.3Outlays for TARP in 2011 and subsequent years result from obligations incurred through October 3, 2010 for the Home Affordable Modification Program and otherTARP programs.4These amounts represent a placeholder for major disasters requiring Federal assistance for relief and reconstruction.Such assistance might be provided in the formof discretionary or mandatory outlays or tax relief.These amounts are included as outlays for convenience.

# 28 MID-SESSION REVIEWTableS–4.PROPOSED BUDGET BY CATEGORY(In billions of dollars)201020112012201320142015201620172018201920202021Totals2012–20162012–2021Outlays:Appropriated (“discretionary”) programs:1Security������������������������������������������������8168358608057717617687817978138308473,9648,031Non-security���������������������������������������4904774403943843873883934014104194271,9934,043Subtotal, appropriated programs����1,3061,3121,3001,1991,1551,1471,1561,1741,1981,2231,2481,2745,95712,074Mandatory programs:Social Security�������������������������������������7017267688138589079591,0151,0741,1381,2061,2784,30510,015Medicare����������������������������������������������4464844785245545806316546787387948522,7666,482Medicaid����������������������������������������������2732732662853483864214514805145475861,7054,284Troubled Asset Relief Program(TARP)2�������������������������������������������–110–3817126521***.........4243Other mandatory programs����������������6446576025595796166686716747137377793,0246,598Subtotal, mandatory programs�������1,9542,1022,1322,1922,3442,4932,6812,7912,9073,1033,2843,49511,84327,422Net interest����������������������������������������������1962162352963844735456136717247758241,9325,539Adjustments to reflect possibleemergencies3����������������������������������������.........13789910101010103686Total outlays����������������������������������������3,4563,6303,6703,6933,8914,1234,3914,5884,7855,0605,3175,60319,76745,120Receipts:Individual income taxes���������������������������8991,0891,2091,3411,4911,6331,7731,9102,0392,1642,2912,4207,44718,271Corporation income taxes������������������������1911943334084814293964514554674664872,0454,372Social insurance and retirement receipts:Social Security payroll taxes�������������6325646517217628048619089581,0071,0511,1043,8008,827Medicare payroll taxes�����������������������1801882002152322462642792943093233401,1562,700Unemployment insurance������������������455555596264656159616061305608Other retirement���������������������������������888889999910104389Excise taxes����������������������������������������������67707987971021041081151281341404691,094Estate and gift taxes��������������������������������19712132426283133363841104282Customs duties�����������������������������������������253034373942434648515355195448Deposits of earnings, Federal ReserveSystem��������������������������������������������������768673554440394347505354252499Other miscellaneous receipts������������������212219195269747882879399235674Total receipts���������������������������������������2,1632,3142,6742,9643,2923,4643,6573,9234,1404,3704,5714,81116,05037,865Allowance for Joint Committee deficitreduction target4....................................................–40–81–125–138–151–165–178–192–206–223–536–1,500Deficit..........................................................1,2931,3169566484735215835014674985405683,1815,755Net interest4���������������������������������������������1962162342953784615255876366827247631,8935,286Primary deficit/surplus (–).................1,0971,100722353956058–86–169–184–184–1951,287469

# 29 SUMMARY TABLESTableS–4.PROPOSED BUDGET BY CATEGORY—Continued(In billions of dollars)201020112012201320142015201620172018201920202021Totals2012–20162012–2021On-budget deficit��������������������������������������1,3701,3771,0207105365856615805495766066253,5136,449Off-budget surplus (–)������������������������������–77–62–64–63–63–64–78–79–82–78–66–57–332–694Memorandum, budget authority for appropriated programs:1Security�����������������������������������������������������8578478117367487617757918078248418583,8317,952Non-security��������������������������������������������4013703603623693763843924014104194281,8513,900Total, appropriated funding����������������1,2581,2181,1701,0981,1171,1371,1591,1831,2081,2341,2601,2865,68211,852* $500 million or less.1Discretionary spending levels other than overseas contingency operations reflect the budget authority caps under the Budget Control Act of 2011.The split of discretionary spending between security and non-security after 2013 is based on increasing budget authority in each category by the growth rate in the aggregate discretionarycap.2Outlays for TARP in 2011 and subsequent years result from obligations incurred through October 3, 2010 for the Home Affordable Modification Program and otherTARP programs.3These amounts represent a placeholder for major disasters requiring Federal assistance for relief and reconstruction.Such assistance might be provided in the formof discretionary or mandatory outlays or tax relief.These amounts are included as outlays for convenience.4Includes debt service on Joint Committee proposals.

# 30 MID-SESSION REVIEWTableS–5.PROPOSED BUDGET BY CATEGORY AS A PERCENT OF GDP(As a percent of GDP)201020112012201320142015201620172018201920202021Averages2012–20162012–2021Outlays:Appropriated (“discretionary”) programs:1Security����������������������������������������������������������������5.75.65.54.94.44.14.03.83.73.63.63.54.64.1Non-security�������������������������������������������������������3.43.22.82.42.22.12.01.91.91.81.81.82.32.1Subtotal, appropriated programs��������������������9.18.88.37.36.66.25.95.75.65.55.45.26.96.2Mandatory programs:Social Security�����������������������������������������������������4.94.84.94.94.94.94.95.05.05.15.25.34.95.0Medicare��������������������������������������������������������������3.13.23.13.23.23.13.23.23.23.33.43.53.23.2Medicaid��������������������������������������������������������������1.91.81.71.72.02.12.22.22.22.32.32.41.92.1Troubled Asset Relief Program (TARP)2�����������–0.8–0.30.10.1*******.........0.1*Other mandatory programs��������������������������������4.54.43.83.43.33.33.43.33.13.23.23.23.53.3Subtotal, mandatory programs�����������������������13.614.013.613.313.513.513.813.613.613.914.114.413.513.7Net interest��������������������������������������������������������������1.41.41.51.82.22.62.83.03.13.23.33.42.22.7Adjustments to reflect possible emergencies3��������.........*************Total outlays��������������������������������������������������������24.124.323.422.422.322.422.622.422.422.722.823.022.622.6Receipts:Individual income taxes�������������������������������������������6.37.37.78.18.68.99.19.39.59.79.89.98.59.1Corporation income taxes����������������������������������������1.31.32.12.52.82.32.02.22.12.12.02.02.32.2Social insurance and retirement receipts:Social Security payroll taxes�����������������������������4.43.84.24.44.44.44.44.44.54.54.54.54.34.4Medicare payroll taxes���������������������������������������1.31.31.31.31.31.31.41.41.41.41.41.41.31.3Unemployment insurance����������������������������������0.30.40.40.40.40.30.30.30.30.30.30.30.30.3Other retirement�������������������������������������������������0.10.10.10.1**********Excise taxes��������������������������������������������������������������0.50.50.50.50.60.60.50.50.50.60.60.60.50.5Estate and gift taxes������������������������������������������������0.10.10.10.10.10.10.10.20.20.20.20.20.10.1Customs duties���������������������������������������������������������0.20.20.20.20.20.20.20.20.20.20.20.20.20.2Deposits of earnings, Federal Reserve System�������0.50.60.50.30.30.20.20.20.20.20.20.20.30.3Other miscellaneous receipts����������������������������������0.10.10.10.10.30.40.40.40.40.40.40.40.30.3Total receipts�������������������������������������������������������15.115.517.118.018.918.818.819.219.319.619.619.818.318.9Allowance for Joint Committee deficitreduction target4....................................................................–0.3–0.5–0.7–0.8–0.8–0.8–0.8–0.9–0.9–0.9–0.6–0.7Deficit..........................................................................9.08.86.13.92.72.83.02.42.22.22.32.33.73.0Net interest4�������������������������������������������������������������1.41.41.51.82.22.52.72.93.03.13.13.12.12.6Primary deficit/surplus (–).................................7.67.44.62.10.50.30.3–0.4–0.8–0.8–0.8–0.81.60.4On-budget deficit������������������������������������������������������9.59.26.54.33.13.23.42.82.62.62.62.64.13.4Off-budget surplus (–)����������������������������������������������–0.5–0.4–0.4–0.4–0.4–0.3–0.4–0.4–0.4–0.4–0.3–0.2–0.4–0.4

# 31 SUMMARY TABLESTableS–5.PROPOSED BUDGET BY CATEGORY AS A PERCENT OF GDP—Continued(As a percent of GDP)201020112012201320142015201620172018201920202021Averages2012–20162012–2021Memorandum, budget authority for appropriated programs:1Security���������������������������������������������������������������������6.05.75.24.54.34.14.03.93.83.73.63.54.44.1Non-security������������������������������������������������������������2.82.52.32.22.12.02.01.91.91.81.81.82.12.0Subtotal, appropriated programs�����������������������8.88.17.56.76.46.26.05.85.65.55.45.36.56.0*0.05 percent of GDP or less.1Discretionary spending levels other than overseas contingency operations reflect the budget authority caps under the BudgetControl Act of 2011.The split ofdiscretionary spending between security and non-security after 2013 is based on increasing budget authority in each category by the growth rate in the aggregate discretionary cap.2Outlays for TARP in 2011 and subsequent years result from obligations incurred through October 3, 2010 for the Home Affordable Modification Program and otherTARP programs.3These amounts represent a placeholder for major disasters requiring Federal assistance for relief and reconstruction.Such assistance might be provided in the formof discretionary or mandatory outlays or tax relief.These amounts are included as outlays for convenience.4Includes debt service on Joint Committee proposals.

# 32 MID-SESSION REVIEWTableS–6.PROPOSED BUDGET IN POPULATION- AND INFLATION-ADJUSTED DOLLARS(In billions of constant dollars, adjusted for population growth)2012201320142015201620172018201920202021Outlays:Appropriated ("discretionary") programs:1Security����������������������������������������������������������������������������������860782728697683673667660654647Non-security�������������������������������������������������������������������������440383362354345339336333330327Subtotal, appropriated programs�������������������������������������1,3001,1651,0901,0511,0281,0131,002993983974Mandatory programs:Social Security�����������������������������������������������������������������������768790810831853875899924950976Medicare��������������������������������������������������������������������������������478509523531561564568599625651Medicaid��������������������������������������������������������������������������������266277328353374389402417431448Troubled Asset Relief Program (TARP)2������������������������������17116421***.........Other mandatory programs��������������������������������������������������602543546565594578564579581595Subtotal, mandatory programs����������������������������������������2,1322,1302,2132,2852,3842,4072,4332,5192,5872,671Net interest�������������������������������������������������������������������������������235287362434484529561588610630Adjustments to reflect possible emergencies3��������������������������3788888888Total outlays��������������������������������������������������������������������������3,6703,5893,6733,7773,9053,9584,0054,1084,1884,282Receipts:Individual income taxes������������������������������������������������������������1,2091,3031,4081,4961,5771,6471,7061,7571,8051,850Corporation income taxes���������������������������������������������������������333396454393352389381379367372Social insurance and retirement receipts:Social Security payroll taxes�����������������������������������������������651701719737766783802817828844Medicare payroll taxes���������������������������������������������������������200209219225234240246251254260Unemployment insurance����������������������������������������������������55585958585349504747Other retirement�������������������������������������������������������������������8888888878Excise taxes�������������������������������������������������������������������������������79859294929496104105107Estate and gift taxes�����������������������������������������������������������������12132224252728293031Customs duties��������������������������������������������������������������������������34363738393940414242Deposits of earnings, Federal Reserve System������������������������73544137353739414241Other miscellaneous receipts���������������������������������������������������19194963666768717376Total receipts�������������������������������������������������������������������������2,6742,8803,1083,1733,2523,3843,4653,5483,6013,677Allowance for Joint Committee deficit reduction target4–40–79–118–127–134–142–149–156–162–171Deficit...........................................................................................956629447477518432391404425434Net interest4�������������������������������������������������������������������������������234286357422467506533554570584Primary deficit/surplus (–)..................................................722343905551–74–141–149–145–149On-budget deficit�����������������������������������������������������������������������1,020690506536588500460468477478Off-budget surplus (–)���������������������������������������������������������������–64–61–59–59–69–69–69–64–52–44

# 33 SUMMARY TABLESTableS–6.PROPOSED BUDGET IN POPULATION- ANDINFLATION-ADJUSTED DOLLARS—Continued(In billions of constant dollars, adjusted for population growth)2012201320142015201620172018201920202021Memorandum, budget authority for appropriatedprograms:1Security��������������������������������������������������������������������������������������811715706697689682675669662656Non-security�����������������������������������������������������������������������������360352349345341338335333330327Subtotal, appropriated programs�����������������������������������������1,1701,0671,0551,0421,0301,0201,0111,002992983Memorandum, index of population growth and inflation.....1.001.031.061.091.121.161.191.231.271.31* $500 million or less.1Discretionary spending levels other than overseas contingency operations reflect the budget authority caps under the BudgetControl Act of 2011.The split of discretionary spending between security and non-security after 2013 is based on increasing budget authority in each category by the growth rate in the aggregate discretionarycap.2Outlays for TARP in 2011 and subsequent years result from obligations incurred through October 3, 2010 for the Home Affordable Modification Program and otherTARP programs.3These amounts represent a placeholder for major disasters requiring Federal assistance for relief and reconstruction.Such assistance might be provided in the formof discretionary or mandatory outlays or tax relief.These amounts are included as outlays for convenience.4Includes debt service on Joint Committee proposals.

# 34 MID-SESSION REVIEWTableS–7.BRIDGE FROM BUDGET ENFORCEMENT ACT BASELINE TO ADJUSTED BASELINE(Deficit increases (+) or decreases (–) in billions of dollars)201020112012201320142015201620172018201920202021Totals2012-20162012-2021BEA baseline deficit..............................................1,2931,3141,0116544755265854934494684955103,2515,666Adjustments for current policy:Index to inflation the 2011 parameters of theAMT�������������������������������������������������������������������..................181101061211391591802022272524941,513Continue the 2001 and 2003 tax cuts������������������..................141131912062212322382452522607441,971Extend estate, gift, and generation-skippingtransfer taxes at current parameters��������������.........1243337414549535760118382Prevent reduction in Medicare physicianpayments�����������������������������������������������������������..................13222325283033364043111293Reflect incremental cost of funding existing Pellmaximum grant award�������������������������������������..................-*-*388766661850Subtotal������������������������������������������������������������.........1462493563974364735065425816221,4854,210Adjustments for provisions contained in theBudget Control Act:Set discretionary budget authority at cap levels�����..................–27–54–74–87–97–104–112–120–128–138–339–942Make disaster relief cap adjustments1����������������..............................................................................................................................Make program integrity adjustments������������������..................–1–3–4–4–6–6–7–8–9–9–17–56Subtotal������������������������������������������������������������..................–27–57–78–92–102–110–119–128–137–147–356–997Adjustment to reflect costs of possibleemergencies2..............................................................*3789910101010103686Reclassify surface transportation outlays:Remove outlays from appropriated category�������–41–46–54–50–59–60–60–61–64–65–66–67–282–606Add outlays to mandatory category���������������������414654505960606164656667282606Subtotal������������������������������������������������������������..............................................................................................................................Total program adjustments����������������������������������.........2221992863143433723984254544841,1653,298Debt service on adjustments��������������������������������.........**2112744638410513015684623Total adjustments��������������������������������������������.........2222012973423874354815305846401,2493,921Adjusted baseline deficit.....................................1,2931,3161,0338557728689729289309981,0791,1514,5009,586*$500 million or less.1OMB is in the process of developing its estimate of the 10-year average calculation for disaster relief pursuant to section 251(b)(2)(D) of the BCA.OMB's estimate ofthe maximum adjustment for 2012 will be transmitted to the Congress when OMB submits its report in compliance with section 251(b)(2)(D)(ii) of the BCA.2These amounts represent a placeholder for major disasters requiring Federal assistance for relief and reconstruction.Such assistance might be provided in the formof discretionary or mandatory outlays or tax relief.These amounts are included as outlays for convenience.

# 35 SUMMARY TABLESTableS–8.CHANGE IN THE ADJUSTED BASELINE FROM BUDGET TO MSR(In billions of dollars)20112012201320142015201620172018201920202021Totals2012-20162012-2021February deficits in the adjustedbaseline....................................................1,5971,0908467708419388908919601,0451,116Percent of GDP������������������������������������������10.6%6.9%5.1%4.3%4.5%4.7%4.3%4.1%4.2%4.4%4.5%Conceptual changes in the baseline:Extend expiring high-income tax cutsand current estate tax relief�������������*1347637791101108115122130290866Extend expiring Medicare physicianpayment relief�����������������������������������.........13222325283033364043111293Debt service�������������������������������������������**141015222937455530218Subtotal, conceptual changes������������*2669911121341531691872072284321,377Revisions due to enacted legislation:Budget Control Act�������������������������������–*–26–50–78–97–108–116–124–133–143–153–359–1,0282011 full-year appropriations���������������–20–37–38–36–32–33–34–35–36–38–38–175–357Other legislative changes���������������������1–*221111111612Debt service�������������������������������������������–*–*–2–7–14–21–29–38–47–56–67–44–281Subtotal, enacted legislation������������–19–63–89–119–141–161–178–196–215–235–257–573–1,654Revisions due to updated economicassumptions:Receipts������������������������������������������������–192235054524441424244181394Mandatory outlays�������������������������������–*1417202122222121222696209Net interest������������������������������������������12–2–14–15291519232730–2093Subtotal, economic revisions������������–7142755788381818691100257696Revisions due to updated technicalassumptions:Receipts�������������������������������������������������–123–67–30–39–33–32–27–24–28–32–37–200–347Discretionary outlays:Security����������������������������������������������–561630181213151821242789193Non-security���������������������������������������–32612988877776399Mandatory outlays:Refundable tax credits�����������������������868111516161616171856139Unemployment compensation����������–11–15–13–12–11–11–10–9–9–10–11–62–112Social Security������������������������������������–2–2–2–2–1*11112–7–2Medicaid��������������������������������������������–3–3–3–5–7–8–9–10–12–13–17–25–87Medicare���������������������������������������������–4–4–1–**135668–424Supplemental Nutrition AssistanceProgram������������������������������������������*543555431–*2235Purchases of GSE preferred stock�����–25............................................................................................................Veterans benefits��������������������������������–103111122222717Other���������������������������������������������������–248721–1–5–6–6–8–618–13

# 36 MID-SESSION REVIEWTableS-8.CHANGE IN THE ADJUSTED BASELINE FROM BUDGET TO MSR—Continued(In billions of dollars)20112012201320142015201620172018201920202021Totals2012-20162012-2021Net interest������������������������������������������–2–3–9–13–12–15–15–18–22–25–29–52–161Costs of possible emergencies���������������–2–3–1–*–*–*–*....................................–6–6Subtotal, technical revisions������������–255–351–25–21–22–16–15–20–29–37–102–220Total changes since February��������������������–281–58822734394038343514199MSR deficits in the adjusted baseline....1,3161,0338557728689729289309981,0791,151Percent of GDP������������������������������������������8.8%6.6%5.2%4.4%4.7%5.0%4.5%4.3%4.5%4.6%4.7%Memorandum:February funding ("budgetary resources")for appropriated programs�������������������1,2311,2871,3071,3371,3661,3961,4281,4611,4961,5321,569Change in funding:Security����������������������������������������������–2–19–33–37–41–45–47–50–53–56–60–175–441Non-security���������������������������������������–11–63–62–65–67–70–72–75–77–81–85–328–717Total change in funding����������������–13–82–95–103–108–115–119–125–130–137–145–503–1,158MSR funding for appropriated programs�����1,2181,2051,2121,2341,2571,2811,3081,3371,3661,3951,425*$500 million or less.

# 37 SUMMARY TABLESTableS–9.MANDATORY AND RECEIPT PROPOSALS FROM THE FEBRUARY BUDGET(Deficit increases (+) or decreases (–) in millions of dollars)20112012201320142015201620172018201920202021Totals2012–20162012–2021Tax Provisions:Tax Cuts for Families and Individuals:Extend earned income tax credit for largerfamilies1���������������������������������������������������������..................811,4221,4421,4691,5091,5441,5791,6101,6574,41412,313Expand child and dependent care tax credit1��.........2831,0431,0451,0421,0391,0351,0361,0331,0281,0214,4529,605Provide for automatic enrollment in IRAs,including employer tax credit, and doublethe tax credit for small employer planstartup costs1�������������������������������������������������..................6381,0431,1001,2401,4481,7042,0152,3812,8094,02114,378Extend American opportunity tax credit1��������..................65010,77210,83211,55211,53311,36412,11112,11712,66533,80693,596Provide exclusion from income for studentloan forgiveness���������������������������������������������.....................................................................................................................Tax qualified dividends and net long-termcapital gains at a 20-percent rate for upperincome taxpayers������������������������������������������.........7,8689,5825,4059,41612,96414,68815,11915,58616,15816,88545,235123,671Total, tax cuts for families and individuals�.........8,15111,99419,68723,83228,26430,21330,76732,32433,29435,03791,928253,563Tax Cuts for Businesses:Eliminate capital gains taxation oninvestments in small business stock������������......................................................1835661,0551,5872,026.........5,417Enhance and make permanent the researchand experimentation tax credit��������������������.........4,6108,0638,8849,70810,52011,31812,10312,88713,68614,49941,785106,278Provide additional tax credits for investmentin qualified property used in a qualifiedadvanced energy manufacturing project�����.........2847311,0891,138578120–73–115–64–273,8203,661Provide tax credit for energy efficientcommercial building property expendituresin place of existing tax deduction�����������������.........4504251002525.............................................1,0251,025Total, tax cuts for businesses������������������������.........5,3449,21910,07310,87111,12311,62112,59613,82715,20916,49846,630116,381Incentives to promote regional growth:Extend and modify the New Markets taxcredit��������������������������������������������������������������4162116183234263272264243170638581,870Reform and extend Build America bonds1�������122243333331328Reform and expand the Low-Income HousingTax Credit (LIHTC)��������������������������������������151632527194116139162185176872Designate Growth Zones1���������������������������������.........279863860839815186–383–374–329–2733,6562,483Total, incentives to promote regional growth433489971,0771,1291,152555.........116–224,7035,253Continue certain expiring provisionsthrough calendar year 20121....................8669,95910,459734372158619512216919221,68222,321Pay for Three Years of AMT Relief:Reduce the value of certain taxexpenditures�����������������������������������������������.........–6,008–18,996–26,418–29,766–32,696–35,699–38,644–41,496–44,388–47,180–113,884–321,291

# 38 MID-SESSION REVIEWTableS–9.MANDATORY AND RECEIPT PROPOSALS FROMTHE FEBRUARY BUDGET—Continued(Deficit increases (+) or decreases (–) in millions of dollars)20112012201320142015201620172018201920202021Totals2012–20162012–2021Other Revenue Changes and LoopholeClosers:Reform treatment of financial institutions andproducts:Impose a financial crisis responsibilityfee����������������������������������������������������������������..................–1,000–3,000–3,000–3,000–4,000–4,000–4,000–4,000–4,000–10,000–30,000Require accrual of income on forward sale ofcorporate stock�������������������������������������������–1–6–12–19–26–33–36–38–40–42–44–96–296Require ordinary treatment of income fromday-to-day dealer activities for certaindealers of equity options and commodities–35–144–226–240–254–270–286–303–321–341–361–1,134–2,746Modify the definition of “control” forpurposes of section 249 of the InternalRevenue Code���������������������������������������������.........–9–15–16–17–17–18–19–20–21–22–74–174Total, reform treatment of financialinstitutions and products�������������������–36–159–1,253–3,275–3,297–3,320–4,340–4,360–4,381–4,404–4,427–11,304–33,216Reinstate Superfund taxes�������������������������������.........–1,374–1,926–2,038–2,093–2,144–2,185–2,212–2,246–2,272–2,329–9,575–20,819Increase Oil Spill Liability Trust Fundfinancing rate by one cent����������������������������.........–35–46–46–46–46–46–46–47–46–47–219–451Make unemployment insurance surtaxpermanent�����������������������������������������������������.........–1,375–1,413–1,449–1,477–1,503–1,526–1,543–1,558–1,577–1,594–7,217–15,015Repeal LIFO method of accounting forinventories�����������������������������������������������������..................–2,598–5,649–6,484–6,457–6,435–6,387–6,337–6,293–6,240–21,188–52,880Repeal gain limitation for dividends receivedin reorganization exchanges�������������������������.........–47–79–81–84–86–89–92–94–97–100–377–849Reform U.S.international tax system:Defer deduction of interest expense relatedto deferred income��������������������������������������.........–2,986–5,138–5,396–5,636–5,861–6,080–3,114–1,103–1,149–1,202–25,017–37,665Determine the foreign tax credit on apooling basis�����������������������������������������������.........–2,655–4,568–4,798–5,011–5,211–5,406–5,601–5,810–6,051–6,333–22,243–51,444Tax currently excess returns associatedwith transfers of intangibles offshore�������.........–1,204–2,038–2,114–2,212–2,280–2,290–2,231–2,158–2,138–2,166–9,848–20,831Limit shifting of income through intangibleproperty transfers��������������������������������������.........–29–63–90–118–148–178–209–242–276–315–448–1,668Disallow the deduction for excess non-taxedreinsurance premiums paid to affiliates���.........–129–223–237–250–264–277–289–302–315–328–1,103–2,614Limit earnings stripping by expatriatedentities��������������������������������������������������������.........–212–364–382–401–421–442–464–487–512–537–1,780–4,222Modify tax rules for dual capacity taxpayers.........–532–918–974–1,031–1,085–1,138–1,190–1,242–1,296–1,352–4,540–10,758Total, reform U.S.international taxsystem��������������������������������������������������.........–7,747–13,312–13,991–14,659–15,270–15,811–13,098–11,344–11,737–12,233–64,979–129,202

# 39 SUMMARY TABLESTableS–9.MANDATORY AND RECEIPT PROPOSALS FROMTHE FEBRUARY BUDGET—Continued(Deficit increases (+) or decreases (–) in millions of dollars)20112012201320142015201620172018201920202021Totals2012–20162012–2021Reform treatment of insurance companies andproducts:Modify rules that apply to sales of lifeinsurance contracts������������������������������������.........–8–42–82–97–115–134–154–177–203–231–344–1,243Modify dividends-received deduction for lifeinsurance company separate accounts�����.........–172–465–547–579–605–607–585–555–528–503–2,368–5,146Expand pro-rata interest expensedisallowance for corporate-owned lifeinsurance (COLI)���������������������������������������.........–21–71–181–273–433–652–900–1,280–1,714–2,166–979–7,691Total, reform treatment of insurancecompanies and products���������������������.........–201–578–810–949–1,153–1,393–1,639–2,012–2,445–2,900–3,691–14,080Eliminate fossil fuel tax preferences:Eliminate coal preferences:Repeal expensing of exploration anddevelopment costs�������������������������������.........–27–45–47–49–51–50–48–47–45–38–219–447Repeal percentage depletion for hardmineral fossil fuels������������������������������.........–78–129–129–130–135–139–145–149–154–165–601–1,353Repeal capital gains treatment forroyalties�����������������������������������������������–6–11–13–22–31–38–43–47–51–55–58–115–369Repeal domestic manufacturingdeduction for coal and other hardmineral fossil fuels������������������������������.........–20–35–38–39–41–44–45–48–49–51–173–410Total, eliminate coal preferences������–6–136–222–236–249–265–276–285–295–303–312–1,108–2,579Eliminate oil and gas preferences:Repeal enhanced oil recovery credit������.....................................................................................................................Repeal credit for oil and gas producedfrom marginal wells����������������������������.....................................................................................................................Repeal expensing of intangible drillingcosts�����������������������������������������������������.........–1,875–2,512–1,762–1,403–1,331–1,124–830–640–523–447–8,883–12,447Repeal deduction for tertiary injectants.........–6–10–10–10–10–10–9–9–9–9–46–92Repeal exception to passive losslimitations for working interests inoil and natural gas properties������������.........–23–27–24–22–21–19–18–17–16–16–117–203Repeal percentage depletion for oil andnatural gas wells���������������������������������.........–607–1,038–1,079–1,111–1,142–1,177–1,211–1,243–1,273–1,321–4,977–11,202Repeal domestic manufacturingdeduction for oil and natural gascompanies��������������������������������������������.........–902–1,558–1,653–1,749–1,842–1,932–2,020–2,108–2,200–2,296–7,704–18,260

# 40 MID-SESSION REVIEWTableS–9.MANDATORY AND RECEIPT PROPOSALS FROMTHE FEBRUARY BUDGET—Continued(Deficit increases (+) or decreases (–) in millions of dollars)20112012201320142015201620172018201920202021Totals2012–20162012–2021Increase geological and geophysicalamortization period for independentproducers to seven years��������������������.........–59–215–330–306–230–152–75–22–9–10–1,140–1,408Total, eliminate oil and gaspreferences�������������������������������������.........–3,472–5,360–4,858–4,601–4,576–4,414–4,163–4,039–4,030–4,099–22,867–43,612Total, eliminate fossil fuel taxpreferences�������������������������������������������������–6–3,608–5,582–5,094–4,850–4,841–4,690–4,448–4,334–4,333–4,411–23,975–46,191Tax carried (profits) interests as ordinaryincome������������������������������������������������������������–318–2,274–2,123–2,154–1,927–1,608–1,322–1,089–908–762–640–10,086–14,807Deny deduction for punitive damages�������������..................–23–34–35–35–36–36–37–37–39–127–312Repeal lower-of-cost-or-market inventoryaccounting method����������������������������������������..................–188–1,435–2,334–1,532–1,358–309–323–337–352–5,489–8,168Simplify the tax code����������������������������������������–16–7–351223–141–147281176107138–148407Reduce the tax gap and make reforms:Expand information reporting:Repeal and modify informationreporting on payments tocorporations and payments forproperty6���������������������������������������������.........4756187569299611,0001,0471,0961,1471,1803,7399,209Require information reporting forprivate separate accounts of lifeinsurance companies��������������������������..................–1–2–3–3–4–5–6–7–8–9–39Require a certified TaxpayerIdentification Number fromcontractors and allow certainwithholding�����������������������������������������–21–48–81–110–115–121–126–132–138–144–150–475–1,165Total, expand information reporting�–214275366448118378709109529961,0223,2558,005Improve compliance by businesses:Require greater electronic filing ofreturns������������������������������������������������.....................................................................................................................Authorize the Department of theTreasury to require additionalinformation to be included inelectronically filed Form 5500Annual Reports����������������������������������.....................................................................................................................Implement standards clarifying whenemployee leasing companies can beheld liable for their clients’ Federalemployment taxes������������������������������.........–4–5–6–6–6–7–7–7–8–8–27–64Increase certainty with respect toworker classification��������������������������.........–12–230–1,237–956–819–904–994–1,088–1,186–1,284–3,254–8,710

# 41 SUMMARY TABLESTableS–9.MANDATORY AND RECEIPT PROPOSALS FROMTHE FEBRUARY BUDGET—Continued(Deficit increases (+) or decreases (–) in millions of dollars)20112012201320142015201620172018201920202021Totals2012–20162012–2021Repeal special estimated tax paymentprovision for certain insurancecompanies�������������������������������������������.....................................................................................................................Eliminate special rules modifying theamount of estimated tax paymentsby corporations�����������������������������������...........................53,610–4,320–49,290..................5,630–5,630...........................Total, improve compliance bybusinesses��������������������������������������.........–16–23552,367–5,282–50,115–911–1,0014,535–6,824–1,292–3,281–8,774Strengthen tax administration���������������������.........–13–18–20–25–28–30–30–32–33–34–104–263Expand penalties:Impose a penalty on failure to complywith electronic filing requirements����.............................................–1–1–1–2–2–2–1–9Increase penalty imposed on paidpreparers who fail to comply withEITC due diligence requirements������.........–13–27–31–32–34–35–35–36–37–38–137–318Total, expand penalties��������������������������.........–13–27–31–32–35–36–36–38–39–40–138–327Modify estate and gift tax valuationdiscounts and make other reforms:Make permanent the portability ofunused exemption between spouses��...........................1072173214215166096997916453,681Require consistency in value fortransfer and income tax purposes������.........–127–171–182–192–204–216–229–243–258–273–876–2,095Modify rules on valuation discounts������.........–806–860–1,558–1,687–1,823–1,966–2,116–2,277–2,444–2,629–6,734–18,166Require a minimum term for grantorretained annuity trusts (GRATs)�������.........–15–46–93–160–231–308–389–477–570–670–545–2,959Limit Duration of Generation SkippingTransfer (GST) Tax Exemption����������.....................................................................................................................Total, modify estate and gift taxvaluation discounts and make otherreforms�����������������������������������������������.........–948–1,077–1,726–1,822–1,937–2,069–2,218–2,388–2,573–2,781–7,510–19,539Total, reduce the tax gap and makereforms������������������������������������������������–21–563–82151,234–6,350–51,278–2,176–2,3753,029–8,473–3,125–7,778–20,898Total, other revenue changes and loopholeclosers���������������������������������������������������������–397–17,390–29,97715,190–44,562–89,414–41,554–37,353–30,416–42,706–38,299–166,153–356,481Trade Initiatives:Promote trade����������������������������������������������������.........1673715146367558379109821,0531,1272,4437,352Other Initiatives:Authorize the limited sharing of business taxreturn information to improve the accuracyof important economic measures�����������������.....................................................................................................................

# 42 MID-SESSION REVIEWTableS–9.MANDATORY AND RECEIPT PROPOSALS FROMTHE FEBRUARY BUDGET—Continued(Deficit increases (+) or decreases (–) in millions of dollars)20112012201320142015201620172018201920202021Totals2012–20162012–2021Eliminate certain reviews conducted by theU.S.Treasury Inspector General for TaxAdministration (TIGTA)�������������������������������.....................................................................................................................Modify indexing to prevent deflationaryadjustments���������������������������������������������������.....................................................................................................................Total, other initiatives�����������������������������������.....................................................................................................................Reauthorize Surface Transportation:Transportation Trust Fund:Outlays��������������������������������������������������������������.........6,72619,05316,23017,98021,96527,11730,41231,73132,20732,077109,071235,498Bipartisan financing for Transportation TrustFund���������������������������������������������������������������.........–20,000–28,000–29,000–31,000–32,000–34,000–36,000–38,000–39,000–41,000–140,000–328,000Subtotal, transportation trust fund��������������.........–13,274–8,947–12,770–13,020–10,035–6,883–5,588–6,269–6,793–8,923–58,046–92,502Upfront investment in aviation�����������������������������.........5962,146608...............................................................3,3503,350Upfront investment in TIGER grants�������������������.........2042068040020014010040..................1,8602,000Total, reauthorize surface transportation.........–12,658–6,381–11,482–12,620–9,835–6,743–5,488–6,229–6,793–8,923–52,976–87,152Mandatory Initiatives and Savings:Agriculture:Change company reimbursement on cropinsurance CAT premium������������������������������.........–161–166–176–179–180–181–183–184–185–187–862–1,782Eliminate cotton and peanut storagepayments�������������������������������������������������������.........–1.................................................................................–1–1Enact Animal Plant and Health InspectionService (APHIS) fees�������������������������������������.........–20–27–27–28–29–30–31–32–33–34–131–291Enact Food Safety and Inspection Service(FSIS) performance fee���������������������������������.........–11–12–12–12–13–13–13–13–13–13–60–125Enact Grain Inspection, Packers, andStockyards Administration (GIPSA) fees����.........–27–29–30–31–31–31–32–32–32–33–148–308Enact Natural Resources ConservationService (NRCS) fee����������������������������������������.........–22–22–22–22–22–22–22–22–22–22–110–220Enact Forest Service payment tocommunities—impact on timber receipts����..................–48–49–49–50–52....................................–196–248Suspend SNAP time limits for able-bodiedworking-age adults without dependents�����.........90511...............................................................142142Restore SNAP beneficiary paymentsterminated in P.L.111–296��������������������������...........................3,23956......................................................3,2953,295Reduce commodity payments to wealthyfarmers����������������������������������������������������������..................–228–261–312–315–265–278–285–284–283–1,116–2,511Impose biobased labeling fee����������������������������.....................................................................................................................Total, Agriculture�������������������������������������������.........–152–4812,663–577–640–594–559–568–569–572813–2,049

# 43 SUMMARY TABLESTableS–9.MANDATORY AND RECEIPT PROPOSALS FROMTHE FEBRUARY BUDGET—Continued(Deficit increases (+) or decreases (–) in millions of dollars)20112012201320142015201620172018201920202021Totals2012–20162012–2021Defense:Shift future Uniformed Services FamilyHealth Plan enrollees into TRICARE-forLife/Medicare:Effect on Medicare Eligible Retiree HealthCare Fund���������������������������������������������������.........–1–4–12–24–43–68–99–137–183–238–84–809Effect on accrual payments (non-PAYGO)����..................7598058508899451,0041,0671,1341,2053,3038,658Subtotal, shift future UniformedServices Family Health Planenrollees into TRICARE-For-Life/Medicare����������������������������������������������.........–17557938268468779059309519673,2197,849Provide additional accrual payments to theMedicare Eligible Retiree Health CareFund (non-PAYGO)���������������������������������������.........–117.................................................................................–117–117Total, Defense������������������������������������������.........–17557938268468779059309519673,2197,849Education:Pell Grant Protection Act:Provide mandatory appropriation to sustainrecent Pell Grant increases7����������������������.........2,0696,2772,9953,3893,7754,2004,6285,0565,4895,98618,50543,864Eliminate in-school interest subsidies forgraduate and professional students8��������.........–984–3,200–3,039–3,019–3,022–3,041–3,110–3,211–3,312–3,343–13,264–29,281Provide current borrowers incentive toconvert from guaranteed loans to directloans to simplify loan servicing�����������������.........–2,136–20–16–10–10–10–11–11–13–7–2,192–2,244Eliminate year-round Pell Grants andsimplify student aid application9��������������–60–535–604–711–840–995–1,157–1,295–1,335–1,372–1,399–3,685–10,243Reform and expand Perkins loan program���.........–578–1,564–1,155–896–705–547–504–494–473–448–4,898–7,364Overhaul TEACH Grants and replace withPresidential Teaching Fellows�������������������.........21021501561501381–54–67–70560508Establish College Completion IncentiveGrants���������������������������������������������������������.........2422202883002919315..................8521,251Accelerate the recall of the Perkins Loanrevolving fund��������������������������������������������.........–384–618–727–764–113–197–2594202342–2,606–2,190Total, Education��������������������������������������–60–2,544415–2,283–1,696–620–323–223604541,061–6,728–5,699Energy:Repeal ultra-deepwater oil and gas researchand development program����������������������������.........–20–40–50–30–10.............................................–150–150Provide HomeStar rebates for energy efficienthome retrofits������������������������������������������������3001,8002,1001,020600180.............................................5,7005,700Total, Energy��������������������������������������������������3001,7802,060970570170.............................................5,5505,550

# 44 MID-SESSION REVIEWTableS–9.MANDATORY AND RECEIPT PROPOSALS FROMTHE FEBRUARY BUDGET—Continued(Deficit increases (+) or decreases (–) in millions of dollars)20112012201320142015201620172018201920202021Totals2012–20162012–2021Health and Human Services:Provide physicians relief from sustainablegrowth rate formula (SGR) and offsetcosts:10Provide SGR relief through 2013������������������.........18,60228,5937,210...............................................................54,40554,405Offset cost of providing SGR relief through2013 with specific health savings3������������.........–1,571–2,175–2,676–4,759–6,056–6,846–7,037–7,275–9,674–14,164–17,237–62,233Provide SGR relief from 2014 onward����������...........................23,20732,07234,69236,73039,85644,76049,90954,22289,971315,448Offset cost of providing SGR relief from2014 onward�����������������������������������������������...........................–23,207–32,072–34,692–36,730–39,856–44,760–49,909–54,222–89,971–315,448Shift future Uniformed Services FamilyHealth Plan enrollees into TRICARE-forLIFE/Medicare:Effect on Medicare�����������������������������������������....................................203050709012015050530Reform child welfare assistance to improvepermanency and safety���������������������������������.........2202452492502502502502502502501,2142,464Strengthen and expand child care assistance�.........3816327307497507507507507507503,2426,992Extend TANF supplemental grants�����������������2234264........................................................................406406Modernize child support program��������������������.........2443102512693033563622522262261,3772,799Extend the child welfare study������������������������.........24........................................................................66Extend Transitional Medical Assistance(TMA)�������������������������������������������������������������.........24041510...............................................................665665Extend Qualified Individuals (QI)�������������������.........495.................................................................................495495Total, Health and Human Services���������������2218,95528,0885,774–3,471–4,723–5,440–5,605–5,933–8,328–12,78844,6236,529Housing and Urban Development:Provide funding for the Affordable HousingTrust Fund����������������������������������������������������.........101402902301901002020..................8601,000Interior:Impose fee on nonproducing oil and gas leases.........–25–39–59–75–90–98–109–116–125–138–288–874Reserve funds for insular affairs assistance����.........25242424221615141211119187Return to net receipts sharing for energyminerals���������������������������������������������������������..................–44–45–47–47–48–50–53–52–55–183–441Reform coal and hardrock Abandoned MineLands (AML) programs2�������������������������������.........–138–386–330–204–129–81–128–145–100–89–1,187–1,730Impose hardrock mining royalty����������������������..................–7–5–6–6–7–10–15–19–25–24–100Repeal Energy Policy Act fee prohibition andmandatory permit funds�������������������������������..................–20–19–18......................................................–57–57Increase Duck Stamp fees2�������������������������������.........–4.................................................................................–4–4Reathorize Federal Land Sales/AcquisitionLaw (FLTFA)�������������������������������������������������.........–3–5–8–10–4.............................................–30–30

# 45 SUMMARY TABLESTableS–9.MANDATORY AND RECEIPT PROPOSALS FROMTHE FEBRUARY BUDGET—Continued(Deficit increases (+) or decreases (–) in millions of dollars)20112012201320142015201620172018201920202021Totals2012–20162012–2021Repeal Geothermal Payments to Countiesunder 2005 Energy Policy Act����������������������.........–7–7–7–7–7–7–8–8–8–8–35–74Repeal “deep gas” royalty incentives����������������.....................................................................................................................Total, Interior�������������������������������������������������.........–152–484–449–343–261–225–290–323–292–304–1,689–3,123Justice:Provide incentives for State medicalmalpractice reform����������������������������������������.........100505050......................................................250250Labor:Give States and employers short-termrelief from interest and tax increasesand strengthen unemployment insurancesystem solvency2�������������������������������������������1,2203,5444,051–7,477–12,863–10,544–11,813–8,55534263–167–23,289–43,527Reform Federal Employees’ CompensationAct (FECA)����������������������������������������������������.........–10–13–5–7–17–26–36–46–56–67–52–283Reauthorize Trade Adjustment Assistance�����1244157138938257467086967107367783,5927,220Protect pension benefits by empowering thePBGC Board to improve solvency����������������...........................–1,121–2,523–2,286–2,141–2,046–1,987–1,966–2,001–5,930–16,071Expand Foreign Labor Certification Fees��������.........–44.................................................................................–44–44Expand work-sharing program2�����������������������.........3617–561908988888889199641Enhance unemployment insurance programintegrity2,4������������������������������������������������������..................–142–261–222438–316195219–137–330–187–556Total, Labor����������������������������������������������������1,3443,9414,626–7,976–14,729–11,573–13,499–9,658–982–1,072–1,698–25,711–52,620Treasury:Levy payments to Medicare providers withdelinquent tax debt2��������������������������������������–17–64–68–71–74–76–76–78–80–80–81–353–748Offset Federal tax refunds to collect Stateincome taxes from debtors who currentlyreside in other States������������������������������������.....................................................................................................................Levy payments to Federal contractors withdelinquent tax debt2��������������������������������������–5–59–61–64–67–69–73–76–80–83–87–320–719Restructure assistance to New York City2�������.........2002002002002002002002002002001,0002,000Total, Treasury�����������������������������������������������–2277716559555146403732327533Veterans Affairs:Extend veterans income verification����������������.........26–7–13–20–27.............................................–41–41Extend VBA authority for use of HHS data����.........421.........–1–2–3–4–5–56–13Reform criteria for special monthly pension���.........–6–10–13–16–20–23–27–30–34–37–65–216Provide authority for vendee loan pooling�������.........–86–931...............................................................–178–178Expand eligibility for VocationalRehabilitation and Employment on-the-jobtraining program5�����������������������������������������.....................................................................................................................

# 46 MID-SESSION REVIEWTableS–9.MANDATORY AND RECEIPT PROPOSALS FROMTHE FEBRUARY BUDGET—Continued(Deficit increases (+) or decreases (–) in millions of dollars)20112012201320142015201620172018201920202021Totals2012–20162012–2021Allow occupancy by a dependent childto satisfy VA home loans occupancyrequirement���������������������������������������������������..................11111111149Total, Veterans Affairs�����������������������������������.........–62–107–23–35–47–24–29–33–38–41–274–439Corps of Engineers:Reform inland waterways funding2������������������..................–196–163–135–72–72–71–69–70–69–566–917Environmental Protection Agency:Enact pesticide registration andpremanufacture notice fees��������������������������.........–49–81–88–95–97–101–104–107–110–114–410–946Establish fees for use of hazardous wasteelectronic manifest system���������������������������...........................–6–4–3–3–3–3–3–3–13–28Total, Environmental Protection Agency������.........–49–81–94–99–100–104–107–110–113–117–423–974Social Security Administration:Require workers’ compensation informationreporting4�������������������������������������������������������.........55........................................................................1010Temporarily extend SSI benefits for refugees�.........8692........................................................................178178Require States and localities to providepension information4�������������������������������������.........132018–202–439–574–609–555–522–479–590–3,329Revert to quarterly wage reporting4����������������.........2030100...............................................................150150Enact DI Work Incentives Simplification Pilot(non-PAYGO)�������������������������������������������������.........51015222513....................................7790Total, Social Security Administration�����������.........129157133–180–414–561–609–555–522–479–175–2,901Other Independent Agencies:Provide financial relief to the U.S.PostalService�����������������������������������������������������������2,2712792493212992802292292292292291,4282,573Federal Communications Commission (FCC):Enact spectrum license user fee��������������������–50–200–300–425–550–550–550–550–550–550–550–2,025–4,775Provide no new funding for theTelecommunications Development Fund��–3–7–7–7–7–7–7–7–7–7–7–35–70Subtotal, Federal CommunicationsCommission (FCC)������������������������������–53–207–307–432–557–557–557–557–557–557–557–2,060–4,845Total, other independent agencies����������������2,21872–58–111–258–277–328–328–328–328–328–632–2,272Multi-Agency:Enact Wireless Innovation and InfrastructureInitiative (WI3):Enact incentive auction authority and otherspectrum reforms���������������������������������������.........–1,900–6,020–8,240–6,430–2,460–400–1,300–1,050..................–25,050–27,800Build a Public Safety Broadband Network��.........1,4001,4001,4001,4001,400.............................................7,0007,000Reserve the D Block for public safety use����.........3,150.................................................................................3,1503,150

# 47 SUMMARY TABLESTableS–9.MANDATORY AND RECEIPT PROPOSALS FROMTHE FEBRUARY BUDGET—Continued(Deficit increases (+) or decreases (–) in millions of dollars)20112012201320142015201620172018201920202021Totals2012–20162012–2021Extend wireless broadband through theNational Wireless Initiative and supportUniversal Service Fund reform�����������������.........2,5001,2501,250...............................................................5,0005,000Create a Wireless Innovation Fund��������������.........40958768162753912334...........................2,8433,000Total, enact Wireless Innovation andInfrastructure Initiative (WI3)����������.........5,559–2,783–4,909–4,403–521–277–1,266–1,050..................–7,057–9,650Implement program integrity allocationadjustments2, 11����������������������������������������������.........–1,497–4,187–6,684–9,465–12,620–14,990–16,632–18,305–19,647–20,976–34,453–125,003Provide $250 Economic Recovery Payments2��14,616265.................................................................................265265Hold harmless the Federal poverty level���������.....................................................................................................................Total, multi-agency����������������������������������������14,6164,327–6,970–11,593–13,868–13,141–15,267–17,898–19,355–19,647–20,976–41,245–134,388Total, mandatory and receipt proposals,including surface transportation...........18,93014,2275,671–2,579–83,764–121,100–76,118–71,523–58,081–73,693–76,882–187,545–543,842Note: For receipt effects, positive figures indicate lower receipts.For outlay effects, positive figures indicate higher outlays.For net costs, positive figures indicatehigher deficits.1The estimates for this proposal include effects on outlays.The outlay effects included in the totals above are listed below:201120122013201420152016201720182019202020212012–20162012–2021Continue certain expiring provisions throughcalendar year 2012���������������������������������������������32502789437384121.............................................2,2332,233Expand earned income tax credit��������������������������..................691,3721,3841,4041,4361,4631,4901,5121,5514,22911,681Expand child and dependent care tax credit��������..................3373473543633723863984104201,4013,387Provide for automatic enrollment in IRAs anddouble the tax credit for small employer planstartup costs�������������������������������������������������������..................3866717990105122142167254880Extend American opportunity tax credit��������������..................164,4654,4254,6554,6084,5314,7914,7755,03813,56137,304Reform and extend Build America bonds�������������1055991,5802,7934,0485,3146,5757,8309,08010,32411,56114,33459,704Designate Growth Zones����������������������������������������.........143443434010–20–20–17–14174113Total outlay effects of receipt proposals�����������1371,1152,8639,52310,70911,97613,09114,29515,86117,14618,72336,186115,3022The estimates for this proposal include effects on receipts.The receipt effects included in the totals above are listed below:201120122013201420152016201720182019202020212012–20162012–2021Reform inland waterways funding������������������������..................–196–163–135–72–72–71–69–70–69–566–917Reform coal and hardrock Abandoned MineLands (AML) programs�������������������������������������..................–200–200–200–200–200–200–200–200–200–800–1,800Increase Duck Stamp fees�������������������������������������.........–14–14–14–14–14–14–14–14–14–14–70–140Give States and employers short-term relief frominterest and tax increases and strengthenunemployment insurance system solvency������.........1,7143,541–7,477–12,863–10,544–11,814–8,55534263–167–25,629–45,868Expand work-sharing program�����������������������������..................–14–205182828181818199505

# 48 MID-SESSION REVIEWTableS–9.MANDATORY AND RECEIPT PROPOSALS FROMTHE FEBRUARY BUDGET—Continued(Deficit increases (+) or decreases (–) in millions of dollars)20112012201320142015201620172018201920202021Totals2012–20162012–2021Enhance unemployment insurance integrity�������..................–54–108–70588–16235538842–144356835Levy payments to Medicare providers withdelinquent tax debt��������������������������������������������–17–64–68–71–74–76–76–78–80–80–81–353–748Levy payments to Federal contractors withdelinquent tax debt��������������������������������������������–5–59–61–64–67–69–73–76–80–83–87–320–719Restructure assistance to New York City�������������.........2002002002002002002002002002001,0002,000Implement program integrity allocationadjustments��������������������������������������������������������.........–276–804–1,970–3,721–5,646–7,227–8,184–8,773–9,274–9,778–12,417–55,653Provide $250 Economic Recovery Payments��������216112.................................................................................112112Total receipt effects of mandatory proposals���1941,6132,330–9,887–16,893–15,751–19,356–16,542–8,513–9,135–10,259–38,588–102,3933The health savings to offset the cost of providing physicians two years of relief from scheduled payment cuts under the sustainable growth rate formula (SGR) arelisted below:201120122013201420152016201720182019202020212012–20162012–2021Expand CMS program integrity authority:Reduce Medicaid provider tax thresholdbeginning in 2015������������������������������������������....................................–1,460–2,050–2,690–2,820–2,970–3,110–3,270–3,510–18,370Strengthen Medicaid third-party liability�������.........–65–95–155–165–170–175–190–195–200–210–650–1,620Track high prescribers and utilizers ofprescription drugs in Medicaid��������������������.........–80–170–310–340–370–390–410–440–460–480–1,270–3,450Require manufacturers that improperlyreport items for Medicaid drug coverage tofully repay States������������������������������������������.........–10–10–10–10–10–15–15–15–15–15–50–125Enforce Medicaid drug rebate agreements������.....................................................................................................................Increase penalties on drug manufacturers forfraudulent non-compliance with Medicaiddrug rebate agreements��������������������������������.....................................................................................................................Require drugs to be properly listed with theFDA to receive Medicaid coverage���������������.....................................................................................................................Prohibit Federal funds from being usedas Medicaid/CHIP State share unlessspecifically authorized by law����������������������.....................................................................................................................Recover erroneous payments made toinsurers participating in MedicareAdvantage�����������������������������������������������������.........–490–570–600–640–650–680–680–660–610–580–2,950–6,160Increase scrutiny of providers using higherrisk banking arrangements to receiveMedicare payments���������������������������������������.....................................................................................................................Allow civil monetary penalties for providerswho do not update enrollment information�...........................–10–10–10–10–10–10–10–10–30–80Study the feasibility of using universalproduct numbers (UPNs) to improvepayment accuracy in Medicare���������������������.....................................................................................................................

# 49 SUMMARY TABLESTableS–9.MANDATORY AND RECEIPT PROPOSALS FROMTHE FEBRUARY BUDGET—Continued(Deficit increases (+) or decreases (–) in millions of dollars)20112012201320142015201620172018201920202021Totals2012–20162012–2021Permit exclusion of individuals affiliated withentities sanctioned for fraudulent or otherprohibited actions from federal health careprograms��������������������������������������������������������......................................................–10–10–10–10–10.........–50Create a system to validate physicians’ andpractitioners’ orders for certain high-riskproducts and services������������������������������������...........................–20–110–200–250–260–280–310–330–330–1,760Require prepayment review for all powerwheelchairs����������������������������������������������������.........–10–20–20–20–20–30–30–30–30–30–90–240Use a portion of Recovery Audit Contractorrecoveries to implement actions thatprevent improper payments and fraud��������....................................–20–30–30–30–40–40–40–80–230Provide flexibility to the Secretary inimplementing predictive analyticstechnologies for claims payment tomaximize cost effectiveness��������������������������..................–20–20–20–30–10....................................–100–100Limit the discharge of debt in bankruptcyproceedings in cases of fraudulent activity�...........................–10–10–20–20–20–20–20–30–40–150Strengthen penalties for illegal distributionof Medicare, Medicaid, or CHIP beneficiaryidentification or billing privileges����������������.....................................................................................................................Total, expand CMS program integrityauthority�����������������������������������������������������.........–655–885–1,155–2,805–3,560–4,310–4,475–4,670–4,815–5,005–9,060–32,335Other Medicaid Proposals:Limit Medicaid reimbursement of durablemedical equipment (DME) based onMedicare rates�����������������������������������������������.........–210–420–470–550–700–730–770–810–850–890–2,350–6,400Rebase Medicaid Disproportionate ShareHospital (DSH) allotments in 2021��������������..........................................................................................–4,170.........–4,170Total, other Medicaid proposals��������������������.........–210–420–470–550–700–730–770–810–850–5,060–2,350–10,570Other Medicare Proposals:Require the Secretary to determine thegeographic scope of Quality ImprovementOrganization (QIO) contracts to maximizeefficiency��������������������������������������������������������.........–20–50–110–190–230–260–290–320–360–390–600–2,220Eliminate the conflict of interest betweenbeneficiary protection and qualityimprovement activities for QIOs������������������.........–10–20–30–60–80–80–90–100–120–120–200–710Expand pool of contractors eligible for QIOwork���������������������������������������������������������������...........................–10–20–20–20–30–20–20–30–50–170Extend the QIO contract length from threeyears up to five years������������������������������������....................................–10–20–20–20–30–30–30–30–160Align QIO contract terminations with FederalAcquisition Regulations��������������������������������.....................................................................................................................

# 50 MID-SESSION REVIEWTableS–9.MANDATORY AND RECEIPT PROPOSALS FROMTHE FEBRUARY BUDGET—Continued(Deficit increases (+) or decreases (–) in millions of dollars)20112012201320142015201620172018201920202021Totals2012–20162012–2021Dedicate EHR penalties to improvingMedicare program financing������������������������.................................................................................–1,620–1,610.........–3,230Total, other Medicare proposals��������������������.........–30–70–150–280–350–380–430–470–2,150–2,180–880–6,490Other Pharmaceutical Proposals:Modify length of exclusivity to facilitate fasterdevelopment of generic biologics������������������....................................–80–250–300–340–420–460–490–330–2,340Prohibit brand and generic drug companiesfrom delaying the availability of newgeneric drugs�������������������������������������������������.........–540–590–680–760–850–910–960–1,070–1,180–1,250–3,420–8,790Streamline pharmacy benefit contracting inthe FEHB program���������������������������������������.........–69–138–147–160–171–184–200–216–231–251–685–1,767Total, other pharmaceutical proposals����������.........–609–728–827–1,000–1,271–1,394–1,500–1,706–1,871–1,991–4,435–12,897Interactions������������������������������������������������������������.........–67–72–74–124–175–321383811272–51259Total savings from CMS programintegrity, and other Medicare,Medicaid, and pharmaceuticalproposals...............................................................–1,571–2,175–2,676–4,759–6,056–6,846–7,037–7,275–9,674–14,164–17,237–62,233Cost of providing SGR relief through 2013������.........18,60228,5937,210...............................................................54,40554,405Additional savings after paying for SGR reliefthrough 2013�������������������������������������������������.........17,03126,4184,534–4,759–6,056–6,846–7,037–7,275–9,674–14,16437,168–7,8284This proposal has both PAYGO and non-PAYGO effects.5This proposal has outlays of less than $500,000 per year.The total cost is $1 million from 2012–2016 and $3 million from 2012–2021.6This proposal was enacted in the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011 (P.L.112–9).7Portions of this proposal were enacted in the Department of Defense and Full-Year Continuing Appropriations Act (P.L.112–10) and the Budget Control Act of2011 (P.L.112–25).8This proposal was enacted in the Budget Control Act of 2011 (P.L.112–25).9This proposal was enacted in the Department of Defense and Full-Year Continuing Appropriations Act (P.L.112–10).10The proposal to provide permanent SGR relief is presented in the adjusted baseline for the Mid-Session Review.The Administration is committed to working withthe Congress to achieve fiscally responsible SGR reform in the context of the Administration’s deficit reduction proposals.11The portions of the proposal that affect SSA and CMS were enacted in the Budget Control Act of 2011 (P.L.112–25).

# 51 SUMMARY TABLESTableS–10.OUTLAYS FOR MANDATORY PROGRAMS UNDER CURRENT LAW1,2(In billions of dollars)2010ActualEstimate201120122013201420152016Human resources programs:Education, training, employment and social services�����������������������������������������������������–7–13710225Health��������������������������������������������������������������������������������������������������������������������������������304314307323417484537Medicare����������������������������������������������������������������������������������������������������������������������������446484466503531556605Income security�����������������������������������������������������������������������������������������������������������������553536480467432435447Social Security�������������������������������������������������������������������������������������������������������������������701726768813859908960Veterans’ benefits and services����������������������������������������������������������������������������������������577569778389101Subtotal, human resources programs�������������������������������������������������������������������������2,0542,1202,0982,1932,3242,4742,655Other mandatory programs:National defense���������������������������������������������������������������������������������������������������������������5887777International affairs���������������������������������������������������������������������������������������������������������-*–3–3–1–1–1–1Energy�������������������������������������������������������������������������������������������������������������������������������1–13231–1Agriculture������������������������������������������������������������������������������������������������������������������������15141118151514Commerce and housing credit������������������������������������������������������������������������������������������–89–1024–22–28–22–15Transportation������������������������������������������������������������������������������������������������������������������2233222Community and regional development����������������������������������������������������������������������������1–211-*-*-*Justice��������������������������������������������������������������������������������������������������������������������������������2376545General government���������������������������������������������������������������������������������������������������������4985555Undistributed offsetting receipts�������������������������������������������������������������������������������������–82–87–98–94–97–101–102Other functions�����������������������������������������������������������������������������������������������������������������1234434Subtotal, other mandatory programs��������������������������������������������������������������������������–141–64–32–71–85–87–82Total, outlays for mandatory programs under current law������������������������������������1,9132,0562,0662,1222,2392,3872,573*$500 million or less.1This table meets the requirements of Section 221(b) of the Legislative Reorganization Act of 1970.2Estimates are based on the Budget Enforcement Act (BEA) baseline.The BEA baseline differs in some instances from current law (see the chapter on “CurrentServices Estimates” in theAnalytical Perspectivesvolume of the 2012 Budget) and also from the adjusted baseline (see Table S–7).

# 52 MID-SESSION REVIEWTableS–11.FUNDING LEVELS FOR APPROPRIATED(“DISCRETIONARY”) PROGRAMS BY CATEGORY(Budget authority in billions of dollars)2010Actual2011EnactedDiscretionary Caps Enacted in the Budget Control Act of 2011Totals20122013201420152016201720182019202020212012-20162012-2021Discretionary Categories:1Security Category��������������������������������������684.4688.1684.0686.0698.0711.0725.0741.0757.0774.0791.0808.03,504.07,375.0Non-Security Category�����������������������������400.4371.0359.0361.0368.0375.0382.0390.0399.0408.0417.0426.01,845.03,885.0Subtotal, Discretionary Category..........1,084.81,059.11,043.01,047.01,066.01,086.01,107.01,131.01,156.01,182.01,208.01,234.05,349.011,260.0Cap Adjustments:2Overseas Contingency Operations3����������162.6159.4126.550.050.050.050.050.050.050.050.050.0326.5576.5Program Integrity Adjustments4��������������0.50.50.91.11.31.51.61.71.71.81.81.86.215.1Subtotal, Cap Adjustments......................163.1159.9127.451.151.351.551.651.751.751.851.851.8332.8591.6Other 2010 and 2011 Supplemental/Emergency Discretionary Funding (notincluded above)������������������������������������������9.6–1.3Grand Total, Discretionary BudgetAuthority.................................................1,257.61,217.71,170.41,098.11,117.31,137.51,158.61,182.71,207.71,233.81,259.81,285.85,681.811,851.6Memorandum, Budget Authority Adjusted for Inflation and Population:5Security������������������������������������������������������913.2873.2810.5715.2706.1697.2689.3682.3675.4669.0662.5655.83,618.36,963.2Non-Security���������������������������������������������427.3381.6359.9351.8348.6344.9341.1337.9335.4332.7329.9327.01,746.33,409.1Grand Total�����������������������������������������������1,340.51,254.91,170.41,067.01,054.61,042.21,030.41,020.11,010.81,001.7992.3982.75,364.610,372.31P.L.112–25, the Budget Control Act of 2011 (BCA), established discretionary caps for 2012–2021.The caps included separate categories for “security” and “nonsecurity” programs for 2012 and 2013 only with security defined as the Departments of Defense, Homeland Security, and Veterans Affairs, the National Nuclear SecurityAdministration, the Intelligence Community Management Account, and budget function 150 for International Affairs.For purposes of this presentation, the security andnon-security categories are increased after 2013 based on the growth in the overall discretionary category but do not reflect specific policy decisions.2The adjustments displayed do not include disaster relief pursuant to section 251(b)(2)(D) of the BCA as OMB is in the process of developing its estimate of the 10-year average calculation at the time the MSR is being printed.OMB's estimate of the maximum adjustment for 2012 will be transmitted to the Congress when OMBsubmits its report in compliance with section 251(b)(2)(D)(ii) of the BCA.3The 2012 Budget includes placeholder estimates of $50 billion per year for Overseas Contingency Operations in 2013 and beyond.These estimates do not reflectany specific policy decisions.4The 2012–2021 levels reflect the maximum cap adjustment permitted each year under the BCA for Continuing Disability Reviews (CDRs) and Redeterminationsand for Health Care Fraud and Abuse Control (HCFAC).The 2010 and 2011 levels reflect only the adjustment for CDRs and Redeterminations because the applicableadjustment for HCFAC became the enforcement base under the BCA.5Totals include Overseas Contingency Operations and Other Supplemental/Emergency Funding.

# 53 SUMMARY TABLESTableS–12.FEDERAL GOVERNMENT FINANCING AND DEBT(In billions of dollars)Actual2010Estimate20112012201320142015201620172018201920202021Financing:Unified budget deficit����������������������������������������������������������������������������������1,2931,316956648473521583501467498540568Other transactions affecting borrowing from the public:Changes in financial assets and liabilities:1Change in Treasury operating cash balance�������������������������������������35–200..........................................................................................Net disbursements of credit financing accounts:Direct loan accounts�����������������������������������������������������������������������179110126173148138124107101969496Guaranteed loan accounts��������������������������������������������������������������213–6–33664–1–5–6–15Troubled Asset Relief Program (TARP) equity purchaseaccounts���������������������������������������������������������������������������������������–295–3121–1–1–4–4–6–7*Net purchases of non-Federal securities by the National RailroadRetirement Investment Trust (NRRIT)�����������������������������������������12–1–1–1–1–1–1–1–1–1–1Net change in other financial assets and liabilities2������������������������–7...................................................................................................Subtotal, changes in financial assets and liabilities���������������������181–708717115114212710595848081Seigniorage on coins������������������������������������������������������������������������������–*–*–*–*–*–*–*–*–*–*–*–*Total, other transactions affecting borrowing from the public�����181–718717115014112710594837980Total, requirement to borrow from the public (equalschange in debt held by the public)�������������������������������������1,4741,2451,043818623662710606562581619649Changes in Debt Subject to Statutory Limitation:Change in debt held by the public��������������������������������������������������������������1,4741,2451,043818623662710606562581619649Change in debt held by Government accounts������������������������������������������179144133167178207225253280275270257Change in other factors������������������������������������������������������������������������������511211222222Total, change in debt subject to statutory limitation���������������������������1,6581,3901,178987803869937861843858891908Debt Subject to Statutory Limitation, End of Year:Debt issued by Treasury�����������������������������������������������������������������������������13,50314,89116,06717,05317,85518,72319,65920,51921,36122,21923,11024,018Adjustment for discount, premium, and coverage3�����������������������������������81011131415161718181818Total, debt subject to statutory limitation4���������������������������������������13,51114,90116,07917,06617,86918,73819,67520,53621,37922,23723,12824,036Debt Outstanding, End of Year:Gross Federal debt:5Debt issued by Treasury������������������������������������������������������������������������13,50314,89116,06717,05317,85518,72319,65920,51921,36122,21923,11024,018Debt issued by other agencies���������������������������������������������������������������262727272727262523222018Total, gross Federal debt��������������������������������������������������������������������13,52914,91816,09517,08017,88218,75019,68520,54421,38522,24123,13024,036

# 54 MID-SESSION REVIEWTableS–12.FEDERAL GOVERNMENT FINANCING AND DEBT—Continued(In billions of dollars)Actual2010Estimate20112012201320142015201620172018201920202021Held by:Debt held by Government accounts������������������������������������������������������4,5104,6544,7874,9545,1335,3395,5645,8176,0976,3726,6416,898Debt held by the public6������������������������������������������������������������������������9,01910,26411,30712,12612,74913,41114,12114,72615,28815,86916,48917,137Debt Held by the Public Net of Financial Assets:Debt held by the public�������������������������������������������������������������������������������9,01910,26411,30712,12612,74913,41114,12114,72615,28815,86916,48917,137Less financial assets net of liabilities:Treasury operating cash balance����������������������������������������������������������310110110110110110110110110110110110Credit financing account balances:Direct loan accounts���������������������������������������������������������������������������6687789041,0771,2251,3631,4861,5931,6941,7901,8841,980Guaranteed loan accounts������������������������������������������������������������������–32–20–26–28–25–19–13–9–10–15–21–36TARP equity purchase accounts��������������������������������������������������������778251525352504642352829Government-sponsored enterprise preferred stock������������������������������109124145153153153153153153153153153Non-Federal securities held by NRRIT�������������������������������������������������232423222120191817161413Other assets net of liabilities����������������������������������������������������������������–29–29–29–29–29–29–29–29–29–29–29–29Total, financial assets net of liabilities����������������������������������������������1,1251,0691,1771,3571,5071,6491,7761,8811,9762,0592,1392,219Debt held by the public net of financial assets������������������������������7,8949,19410,13010,76911,24211,76212,34512,84513,31213,81014,35014,918* $500 million or less.1A decrease in the Treasury operating cash balance (which is an asset) is a means of financing a deficit and therefore has a negative sign; that is, the reduction in cashbalances reduces the amount that would otherwise be borrowed from the public.An increase in checks outstanding (which is a liability) is also a means of financing adeficit and therefore also has a negative sign.2Includes checks outstanding, accrued interest payable on Treasury debt, uninvested deposit fund balances, allocations of special drawing rights, and other liabilityaccounts; and, as an offset, cash and monetary assets (other than the Treasury operating cash balance), other asset accounts, and profit on sale of gold.3Consists mainly of debt issued by the Federal Financing Bank (which is not subject to limit), debt held by the Federal Financing Bank, the unamortized discount (lesspremium) on public issues of Treasury notes and bonds (other than zero-coupon bonds), and the unrealized discount on Government account series securities.4The statutory debt limit is $14,694 billion, as increased on August 2, 2011.Under current law, the limit is scheduled to increase to $15,194 billion on or aroundSeptember 21, 2011.5Treasury securities held by the public and zero-coupon bonds held by Government accounts are almost all measured at sales price plus amortized discount or lessamortized premium.Agency debt securities are almost all measured at face value.Treasury securities in the Government account series are otherwise measured atface value less unrealized discount (if any).6At the end of 2010, the Federal Reserve Banks held $811.7 billion of Federal securities and the rest of the public held $8,207.2 billion.Debt held by the FederalReserve Banks is not estimated for future years.

# EXECUTIVE OFFICE OF THE PRESIDENT

OFFICE OF MANAGEMENT AND BUDGET

WASHINGTON, D.C.