Mid-Session Review

FISCAL YEAR 2002

MID-SESSION REVIEW

BUDGET OF THE

UNITED STATES GOVERNMENT

August 22, 2001

The Honorable J. Dennis Hastert Speaker of the House of Representatives Washington, DC 20515

Dear Mr. Speaker:

Section 1106 of Title 31, United States Code, requires that the President transmit 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 the budget surplus, receipts, outlays, and budget authority for fiscal years 2001 through 2011 and other summary information required by statute.

This report also includes the 0MB Sequestration Update Report to the President and Congress for Fiscal Year 2002, as required by the Budget Enforcement Act of 1990 (BEA), as amended. The report provides current estimates of the status of discretionary spending and the discretionary spending limits. It also provides the status of pay-as-you-go legislation based on reports transmitted to date. The report shows that, in the absence of changes in the caps and payas-you-go requirements, the law would require large automatic reductions in both discretionary and mandatory programs. The Administration will work with Congress to ensure that no unintended sequesters of spending occur.

Sincerely,

Enclosure

Mitchell E. Daniels, Jr. Director

Identical Letter Sent to The President of the Senate

TABLE OF CONTENTS

Page

Transmittal Letter

Table of Contents ...............................................................................................................

i

List of Tables ......................................................................................................................

iii

List of Charts .....................................................................................................................

iv

Summary ............................................................................................................................

1

Maximum Debt Retirement and Projected Surpluses .................................................... 11

Medicare ............................................................................................................................. 13

Economic Assumptions ...................................................................................................... 17

Receipts ............................................................................................................................... 23

Spending ............................................................................................................................. 25

Summary Tables ................................................................................................................ 31

Appendix A: Basis of Social Security Tax Receipts in the Budget ................................ 49

Appendix B: Sequestration Update Report to the President and Congress for 2002 53

GENERAL NOTES

1. All years referred to are fiscal years unless otherwise noted. 2. All totals in the text and tables display both on-budget and off-

budget spending and receipts unless otherwise noted. 3. Details in the tables and text may not add to totals due to

rounding. 4. Web address:

i

LIST OF TABLES

Page

Mid-Session Review

Table 1. Change in Budget Policy Surpluses .............................................................

4

Table 2. Current Surplus Totals ..................................................................................

7

Table 3. April and Mid-Session Budget Totals ...........................................................

8

Table 4. Medicare Fully Funded Under All Budget Scenarios ................................. 13

Table 5. Economic Assumptions .................................................................................. 20

Table 6. Change in Receipts ........................................................................................ 24

Table 7. Change in Outlays ......................................................................................... 27

Table 8. Estimated Spending from 2002 Balances of Budget Authority: Discretionary Programs ............................................................................ 31

Table 9. Outlays for Mandatory Programs Under Current Law .............................. 32

Table 10. Mandatory Proposals ..................................................................................... 33

Table 11. Effect of Proposals on Receipts ..................................................................... 35

Table 12. Outlays by Category ...................................................................................... 37

Table 13. Receipts by Source ......................................................................................... 38

Table 14. Outlays by Agency ......................................................................................... 39

Table 15. Outlays by Function ...................................................................................... 40

Table 16. Discretionary Budget Authority by Agency ................................................. 41

Table 17. Discretionary Budget Authority by Function .............................................. 42

Table 18. Mid-Session Baseline Totals ......................................................................... 43

Table 19. Federal Government Financing and Debt .................................................... 44

Appendix A. Basis of Social Security Tax Receipts in the Budget Table A?1. On-Budget and Social Security Surpluses ................................................... 50

Appendix B. Sequestration Update Report to the President and Congress for 2002

Table 1. Historical Summary of Changes to Discretionary Spending Limits .......... 56 Table 2. Discretionary Spending Limits ..................................................................... 58 Table 3. Summary of 2001 Discretionary Appropriations ......................................... 61

iii

Page

Table 4. Status of 2002 Appropriations Actions ......................................................... 62 Table 5. Comparison of OMB and CBO Discretionary Spending Limits ................. 64 Table 6. Net Cost of Pay-As-You-Go Legislation Enacted as of

August 15, 2001 ........................................................................................ 68 Table 7. Pay-As-You-Go Legislation with Impact of $500,000 or Less

Enacted as of August 15, 2001 ................................................................ 69

LIST OF CHARTS

Chart 1. Second Largest Surplus in History .................................................................

1

Chart 2. Social Security Surpluses Alone Exceed Maximum Retireable Debt ...........

3

Chart 3. Average Percentage Growth by Agency ..........................................................

6

Chart 4. Medicare 2002 Shortfall ................................................................................... 14

Chart 5. Medicare Long-Term Shortfall ........................................................................ 14

iv

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