For other versions of this document, see http://wikileaks.org/wiki/CRS-RL32812 ------------------------------------------------------------------------------ Order Code RL32812 CRS Report for Congress Received through the CRS Web The Budget for Fiscal Year 2006 Updated October 23, 2006 Philip D. Winters Analyst in Government Finance Government and Finance Division Congressional Research Service ~ The Library of Congress The Budget for Fiscal Year 2006 Summary The Treasury provided final budget totals for fiscal year (FY) 2006 -- the deficit was $248 billion, receipts were $2,407 billion, and outlays were $2,654 billion -- on October 11, 2006. The deficit was much lower than earlier estimates because receipts were much higher than earlier estimates. The deficit fell from $319 billion in FY2005, but is expected to rise again in FY2007. The actual deficit was $140 billion below the deficit proposed in the President's FY2006 budget (February 2005). This one-year drop in the deficit has not improved the long-term budget outlook. Early in the FY2006 budget process, the House (H.Con.Res.95) and Senate (S.Con.Res.18) adopted their respective budget resolutions for FY2006 on March 17, 2005. After extensive leadership discussions, a conference reached agreement (H.Rept. 109-62) on April 28; both chambers adopted the resolution later that day. The conference agreement included reconciliation instructions for mandatory spending reductions, tax reductions, and an increase in the statutory debt limit. Congress passed three continuing resolutions (CRs) on appropriations during the fall and early winter of 2005, to fund otherwise unfunded activities. It needed the time to complete action on the regular appropriation bills for FY2006. The last two cleared Congress on December 21, almost three months after the start of FY2006. The Senate (S. 1932, November 3, 2005) and the House (H.R. 4241, November 18) each passed spending reduction reconciliation bills (of $35 billion and $50 billion from baseline estimates over five years, respectively). A conference agreement (H.Rept 109-362) of approximately $40 billion in reductions was reached on December 19, and, after some difficulties, cleared Congress on February 1, 2006. The President signed it into law (P.L.109-171) on February 8. After extended deliberations, Congress cleared a $70 billion revenue reduction reconciliation bill on May 11, 2006. The President signed it on May 17 (P.L.109- 222). The net effect of the two adopted reconciliation bills would raise the deficit in FY2006 and over the next five years above baseline estimates. In mid-March 2006, the House passed a $92 billion supplemental appropriation (H.R. 4939) for FY2006 for overseas military activity and additional hurricane recovery efforts. The Senate passed an amended bill, raising funding to almost $110 billion, on May 4. A conference agreement set the funding at $94.5 billion (June 8). Congress cleared it and the President signed it into law(P.L.109-234) on June 15. In the final estimates from OMB (July 2006) and CBO (August 2006) before the end of FY2006, higher receipts reduced the estimated deficits in both (OMB, $296 billion; CBO $260 billion). These were over $100 billion below OMB's February 2006 estimate and $70 billion below CBO's March 2006 baseline estimate. This report will be updated as events warrant. Contents Background and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 The Current Situation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Budget Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Budget Estimates and Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Uncertainty in Budget Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Budget Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Outlays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Deficits (and Surpluses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 The Longer Run . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 The Budget and the Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 For Additional Reading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 CRS Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 List of Figures Figure 1. Uncertainty in CBO's Projections of the Surplus or Deficit Under Current Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Figure 2. Outlays, FY2000-FY2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Figure 3. Receipts, FY2000-FY2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Figure 4. Surplus/Deficit (-), FY2000-FY2015 . . . . . . . . . . . . . . . . . . . . . . . . . 22 List of Tables Table 1. Budget Estimates for FY2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Table 2. Outlays for FY2004-FY2010 and FY2015 . . . . . . . . . . . . . . . . . . . . . . 11 Table 3. Receipts for FY2004-FY2010 and FY2015 . . . . . . . . . . . . . . . . . . . . . . 17 Table 4. Surpluses/Deficits(-) for FY2004-FY2010 and FY2015 . . . . . . . . . . . 21 The Budget for Fiscal Year 2006 Background and Analysis Presidents submit their budget proposals for the upcoming fiscal year (FY) early in each calendar year. The Bush Administration released its FY2006 budget (The Budget of the U.S. Government, Fiscal Year 2006) on February 7, 2005. The FY2006 release of the multiple volumes of the budget contained general and specific descriptions of the Administration's policy proposals and expectations for the budget for FY2006 through FY2010. It included a section on long-term fiscal issues facing the nation and provides limited information on the revenue and mandatory spending changes after 2010. The full set of budget documents (Budget, Appendix, Analytical Perspectives, Historical Tables, among several others) contained extensive and detailed budget information, including estimates of the budget without the proposed policy changes (current service baseline estimates), historical budget data, detailed budget authority, outlay and receipt data, selected analysis of specific budget-related topics, and the Administration's economic forecast.1 In addition to its presentation of the Administration's proposals, the budget documents are an annual reference source for federal budget information, including enacted appropriations. The Administration's annual budget submission is followed by congressional action on the budget. This usually includes the annual budget resolution, appropriations, and, possibly, a reconciliation bill (or bills) as required by the budget resolution. Over the course of deliberation on the budget, the Administration often revises its original proposals as it interacts with Congress and as conditions change in the economy and the world. The Current Situation The Treasury released final budget total for FY2006 on October 11, 2006. The deficit was $248 billion, well below the Administration's original estimate ($390 billion) in its FY2006 budget (February 2005) or OMB's more recent July 2006 estimate of $296 billion. Substantially higher receipts ($2,407 billion) than previously estimated produced most of the fall in the deficit. The Administration had originally expected FY2006 receipts to be $2,178 billion (February 2005). The 1 Current services baseline estimates, and baseline estimates in general, are not meant to be predictions of future budget outcomes but instead are designed to provide a neutral measure against which to compare proposed policy changes. In general, they project current policy and enacted future changes into the future. Discretionary spending is increased by the rate of inflation. Their construction generally follows instructions in the Balanced Budget and Emergency Deficit Control Act of 1985 (DCA) and the Congressional Control and Impoundment Act of 1974. CRS-2 Administration was expecting receipts to be $2,285 billion in February 2006. By July 2006, OMB's receipt estimate had risen to $2,400 billion. Outlays for FY2006 were $2,654 billion, larger than originally proposed by the President for FY2006 ($2,568 billion), but below the revised level in the FY2007 budget ($2,709 billion; February 2006). Budget Totals Table 1 contains budget estimates for FY2006 from CBO and the Administration (the Office of Management and Budget, OMB); revisions produced by both during the year as they become available; and data from congressional budget deliberations. Differences in totals result from differing underlying economic, technical, and budget-estimating assumptions and techniques, as well as differences in policy assumptions. The policy-generated dollar differences for an upcoming fiscal year can be relatively small compared to the budget as a whole. These small differences may grow over time, sometimes substantially, producing widely divergent future budget paths. Budget estimates are generally expected to change over time from those originally proposed or estimated by the President, CBO, or Congress. Table 1. Budget Estimates for FY2006 (in billions of dollars) Deficit (-)/ Receipts Outlays Surplus CBO, BEO Baseline, 1/05 . . . . . . . . . . . . . . . . $2,212 $2,507 $-295 OMB, Budget Proposals, 2/05 . . . . . . . . . . . . . 2,178 2,568 -390 OMB, Budget, Current Services Baseline, 2/05 2,178 2,539 -361 CBO, Revised Baseline, 3/05 . . . . . . . . . . . . . . 2,212 2,510 -298 CBO, EPP 3/05 . . . . . . . . . . . . . . . . . . . . . . . . 2,210 2,542 -332 House Budget Resolution, 3/05 . . . . . . . . . . . . 2,195 2,571 -376 Senate Budget Committee, 3/05 . . . . . . . . . . . 2,197 2,559 -362 Senate FY06 Budget Resolution 3/05 . . . . . . . 2,193 2,562 -368 Conf. Rept. Budget Resolution 4/28/05 . . . . . . 2,195 2,577 -383 OMB MSR 7/13/05 . . . . . . . . . . . . . . . . . . . . . 2,273 2,613 -341 CBO Update, Baseline, 8/15/05 . . . . . . . . . . . . 2,280 2,595 -314 CBO, BEO, Baseline, 1/06 . . . . . . . . . . . . . . . 2,312 2,649 -337 OMB, Budget Proposals, 2/06 . . . . . . . . . . . . . 2,285 2,709 -423 OMB, Budget, Current Services Baseline, 2/06 2,301 2,669 -367 CBO, Revised Baseline 3/06 . . . . . . . . . . . . . . 2,313 2,648 -336 CBO, EPP 3/06 . . . . . . . . . . . . . . . . . . . . . . . . 2,304 2,675 -371 Senate FY2007 Budget Resolution 3/06 . . . . . 2,303 2,675 -372 House FY2007 Budget Resolution 5/06 . . . . . 2,303 2,675 -372 OMB MSR 7/06 . . . . . . . . . . . . . . . . . . . . . . . . 2,400 2,696 -296 CBO Update, Baseline, 8/06 . . . . . . . . . . . . . . 2,403 2,663 -260 Actual Amounts . . . . . . . . . . . . . . . . . . . . . . . . 2,407 2,654 -248 BEO -- The Budget and Economic Outlook, CBO. EPP -- CBO's estimates of the President's proposals. CSB -- The Administration's current services baseline. MSR -- OMB's Mid-Session Review. Update -- CBO's The Budget and Economic Outlook: An Update. CRS-3 Budget Estimates and Proposals CBO's first budget report for FY2006, the Budget and Economic Outlook: Fiscal Years 2006-2015 (January 2005), contained baseline estimates and projections for FY2005 through FY2015. The report estimated a FY2006 deficit of $295 billion (down from the estimated FY2005 deficit of $368 billion). By FY2010, the baseline deficit estimate had fallen to $189 billion. Under the baseline assumptions, CBO: increases discretionary spending at the rate of inflation; does not include extending the 2001 and 2003 tax cuts after 2010; and allows the alternative minimum tax (AMT) relief to expire as currently scheduled. The effects of these assumptions increase receipts in the near-term (because of the reversion of the AMT to previous law) and increase receipts by substantial amounts after FY2010 when most of the tax cuts from 2001 and 2003 expire under current law. The result of the assumptions that CBO must follow likely understates the size and persistence of the deficit over the next 10 years. The CBO baseline assumptions showed the budget remaining in deficit through FY2011 ($80 billion) followed by surpluses through FY2015 ($141 billion). The reduction in the deficit after calendar year 2010, leading to the surpluses, is largely explained by the required inclusion of the expiration of major tax cuts in the baseline estimates, producing a rapid increase in revenues. CBO's budget reports generally include the estimates (including higher or lower debt-service costs) of selected policies not included in the baseline estimates. They usually reflect possible future policy, such as making the tax cuts permanent, fixing the expanding coverage of the AMT, or changing the rate of discretionary spending growth. In CBO's January 2005 report, making the tax cuts permanent increased the five-year (FY2006-FY2010) cumulative deficit (including higher debt-service costs) by $156 billion, and by a cumulative $1.9 trillion over the 10-year period, FY2006- FY2015). CBO's estimate of reforming the alternative minimum tax produced a $218 billion five-year cumulative increase in the deficit and a $503 billion increase over 10 years (FY2006-FY2015). If discretionary spending were to grow at the rate of GDP, rather than at the rate of inflation, the five-year cumulative deficit would increase by $378 billion and the 10-year cumulative deficit would increase by $1.7 trillion. Freezing discretionary appropriations at the FY2005 level would reduce the five-year cumulative deficit by $294 billion and the 10-year cumulative deficit by $1.3 trillion. President Bush's FY2006 budget called for extending and making permanent most of the tax cuts adopted in 2001 and 2003. The budget showed this reducing receipts by $53 billion between FY2006 and FY2010 and by $1.1 trillion between FY2006 and FY2015 (these estimates do not include the resulting higher debt-service costs resulting from the change). The Administration's total receipt proposals, which include other revenue changes, would reduce five-year receipts by $106 billion and 10-year receipts by $1.3 trillion. The Administration's budget again used a slightly modified set of assumptions to produce the OMB current services baseline estimates, moving the proposed and baseline estimates somewhat closer together. Instead of following the traditional method of constructing baseline estimates, the Administration's FY2006 current CRS-4 services baseline assumed the extension of certain tax provisions (that by current law are scheduled to expire), excluded the future cost of one-time events, and included a timing adjustment to the calculation of federal pay increases. For FY2006, the differences produced an Administration current services baseline deficit estimate $9 billion smaller than the traditional baseline estimate. By FY2010, the Administration's estimated baseline deficit was $16 billion smaller than the traditional baseline deficit estimate. The Administration's budget provided a limited amount of information for the years beyond FY2010. The budget did include estimates of the cumulative proposed revenue changes and proposed mandatory spending changes for the periods FY2006 through FY2010 and FY2006 through FY2015, but it contained no information for the individual years after FY2010. The President's budget included a list of 150 discretionary program eliminations or reductions. According to Administration documentation, these changes would produce approximately $11 billion in budget authority (not outlay) savings in FY2006. The documentation did not indicate the size of the outlay savings that would result from the reduced budget authority. CBO's March 2005 report analyzed the President's policy proposals using CBO's own underlying assumptions and budget estimating methods. The analysis produced smaller deficits in the first couple of years of the five year period in the President's budget and somewhat larger deficits in the later years. CBO extrapolated the policy proposals through FY2015, finding the budget remaining in deficit throughout the period. In CBO's estimates and projections, the deficit falls as a percentage of GDP from an estimated 2.6% of GDP in FY2006 to approximately 1.3% of GDP in FY2012, where it remains through FY2015. The House-passed budget resolution (H.Con.Res. 95) closely followed the President's budget. The Senate passed budget resolution (S.Con.Res. 18) deviated from the House resolution by including smaller mandatory spending cuts in reconciliation instructions, larger tax cuts in reconciliation instructions, and a higher discretionary spending cap. The Senate made these changes to the Senate Budget Committee's reported resolution. The changes moved the House- and Senate-passed resolutions further apart, making reaching an agreement difficult and time consuming. The conference agreement on the budget resolution passed by the House and Senate on April 28, 2005, included revenues of $2,195 billion, outlays of $2,577 billion, and a deficit of $383 billion. The resolution also included three reconciliation instructions that would, over five years, reduce mandatory spending (with the sources of the savings spread among several committees of jurisdiction in the House and Senate) by $35 billion, reduce total revenues by $70 billion, and raise the debt limit to $8.965 trillion. Over the five years covered by the budget resolution, its proposals would produce larger deficits than would have occurred without the included policy changes. CBO's March 2005 baseline deficit estimate was $298 billion while the resolution had a proposed deficit of $383 billion. Under the budget resolution proposals, the cumulative five-year deficit (for FY2006 through FY2010) was $1,797 billion; under CBO's March baseline (no policy changes), the five-year CRS-5 cumulative deficit was $1,232 billion, more than $550 billion smaller than the amounts proposed in the budget resolution. The July 13, 2005 OMB release of the Mid-Session Review had reduced deficits in FY2006 and subsequent years (through FY2010) because of the higher than expected receipts flowing into the Treasury in 2005. CBO's August 2005 Update had a similar pattern of changed deficit estimates. CBO expected less persistence in the higher receipts and no long-term improvement in the budget outlook (compared to its March budget report). The federal response to the devastation caused by Hurricane Katrina and the lesser damage from Hurricane Rita has produced, and will continue to produce a substantial, but uncertain, budgetary responses in FY2006 and likely into FY2007. The higher spending has already added tens of billions of dollars to spending and the deficit in FY2006. The revised budget data for FY2006 from the CBO and OMB budget reports for FY2007 showed higher deficit estimates (compared to the July and August 2005 estimates). Enacted legislation, changes in expected economic conditions, and technical modifications all contributed to the changes in the budget estimates. OMB's February 2006 revisions show receipts $12 billion higher than in its July 2005 estimate and outlays $96 billion larger than its July estimate. CBO's new estimates show FY2006 receipts $32 billion larger than its August 2005 estimate and its outlays $54 billion larger than its August outlay estimate. According to CBO's January 2006 report, legislation adopted since its August 2005 report increased the deficit by $41 billion while changes to CBO's economic forecast reduced the deficit by $21 billion. Technical changes increased the deficit by $2 billion. The net effect for CBO was a $23 billion increase in the estimated deficit for FY2006. CBO released revised baseline estimates and its estimates of the Administration's policy proposals in March 2006. For FY2006, CBO's revised baseline estimates were almost unchanged from its January 2006 estimates. CBO's estimates of the President's proposals (his proposed policy modifications to the FY2006 budget contained in his FY2007 budget submission) showed higher receipts and lower outlays and a smaller deficit than was shown in the Administration's FY2007 budget from February 2006. However, this deficit estimate was larger than the CBO baseline deficit estimate for FY2006. In July 2006, OMB published its Mid-Session Review (for the FY2007 budget cycle) which included revised budget data for FY2006. Substantially higher than previously expected receipts reduced the FY2006 deficit estimate from the Administration's $423 billion deficit estimate in February to $296 billion in July. The higher receipts seem to have come from increased corporate income taxes and non-withheld individual income taxes. With little time left in FY2006 (it ends on September 30, 2006), final budget totals for FY2006 are likely to be similar to the estimates in the MSR. CBO's August 2006 budget report (The Budget and Economic Outlook: An Update) showed a similar improvement in the deficit (to $260 billion) for FY2006. As with the MSR, the reduced deficit resulted from higher receipts rather than reduced outlays. CBO's report did not show any improvement in the longer-term budget outlook. CRS-6 The Treasury provided final budget data for FY2006 on October 11, 2006, in the Final Monthly Treasury Statement of Receipts and Outlays of the United States Government (September 2006). Small revisions to these numbers can be expected when they appear in the President's FY2008 budget documents in February 2007. Uncertainty in Budget Projections All budget estimates and projections are inherently uncertain. Their dependence on assumptions that are themselves subject to substantial variation over short time periods makes budget estimates and projections susceptible to fairly rapid and dramatic changes.2 Small changes in economic conditions (from those used in the estimates), particularly the rate of GDP growth, can produce large changes in the budget estimates. According to CBO, a persistent 0.1% increase in the growth rate of real GDP (beginning in January 2006) would reduce the deficit (including interest costs) by $58 billion cumulatively over a five-year period. This change would reduce the cumulative deficit by $272 billion over the next 10 years. Reductions in the rate of growth would increase the deficit by similar amounts over the same time periods. Figure 1 is from CBO's January 2006 Budget and Economic Outlook. CBO indicates that the most likely deficit or surplus outcomes (as percentages of GDP), through FY2011, are clustered in the center of the figure, in the darkest area. The lighter shades indicate the less likely outcomes. The distance from the top to the bottom of the image in the chart (the fan) represents the range within which CBO predicts that the deficit (or surplus) has a 90% chance of occurring. In FY2011 this ranges from a surplus of almost 5% of GDP to a deficit of approximately 6% of GDP. The President's (FY2007) budget included a chapter in the Analytical Perspectives volume titled "Comparison of Actual to Estimated Totals." The chapter examined the causes of the changes from the initial budget estimates for FY2005 (early in 2004) through the actual results for that year (end of September 2005). Like the CBO information, this provides another example of the uncertainty surrounding budget estimates. The chapter included a chart based on historical experience that indicates the possible range of surplus or deficit outcomes with a 90% certainty. The range for the current year and following year (which the Administration calls the budget year) rise from $260 billion to $535 billion.3 By five years beyond the current year, the range within which the surplus or deficit has a 90% chance of falling exceeds $1.1 trillion. 2 Some things are known with certainty about the direction of future spending and receipts. Demographics can partly determine the shape of future budgets. In the next decade, the growing retirements in the baby boom generation will rapidly drive higher the spending for Social Security and Medicare as well as other federal spending or tax breaks for the elderly. Because virtually all those who will become eligible for these benefits are alive today, estimating the growth in the populations eligible for these programs is relatively straightforward. 3 The current year is the fiscal year we are in: 2006. The budget year is the year that the President's budget covers -- 2007 -- and that Congress will pass legislation to implement. CRS-7 Figure 1. Uncertainty in CBO's Projections of the Surplus or Deficit Under Current Policies Source: Chart and note (below) created by CBO; from The Budget and Economic Outlook: FY2007-FY2016, January 2006, p. 17. Note: This figure, calculated on the basis of CBO's forecasting track record, shows the estimated likelihood of alternative projections of the budget deficit or surplus under current policies. The baseline projections ... fall in the middle of the darkest area of the figure. Under the assumption that tax and spending policies will not change, the probability is 10 percent that actual deficits or surpluses will fall in the darkest area and 90 percent that they will fall within the whole shaded area. Actual deficits or surpluses will be affected by legislation enacted in future years, including decisions about discretionary spending. The effects of future legislation are not reflected in this figure.4 Budget projections are very dependent on the underlying assumptions about the direction of the economy, expected future government policy, and how these interact, along with other factors (such as changing demographics) that affect the budget. Any deviation from the assumptions used in the budget estimates, such as faster or slower economic growth, higher or lower inflation, differences from the expected or proposed spending and tax policies, or changes in the technical components of the budget models can have substantial effects on the budget estimates and projections. Budget Action CBO and the Administration released their first budget reports for FY2006, in late January and early February 2005, respectively. CBO's report provided baseline estimates for FY2005 through FY2015. The CBO baseline estimates, following the instructions mandated by law, did not include any estimated cost for ongoing operations in Afghanistan and Iraq after FY2005 or any estimates of the 4 CBO. Budget and Economic Outlook for Fiscal Years 2007 to 2016, January 2006, p. 17. CRS-8 Administration's proposed, but undefined, change in Social Security. The estimates assumed that the tax cuts adopted over the Administration's first term will expire in 2010 as required by current law and that the Alternative Minimum Tax (AMT) will revert to its previous incarnation when the temporary relief provisions expire at the end of FY2005. OMB's documents provided estimates for FY2005 through FY2010 with a few instances of cumulative estimates for FY2006 through FY2015 (these were limited to revenues and mandatory spending and provided no data for the individual fiscal years after FY2010). The budget also lacked detailed data on program or account spending beyond FY2005. The Analytical Perspectives volume of the President's budget provided the Administration's current services baseline estimates for the years through FY2010. On March 4, 2005, CBO provided its preliminary estimates of the President's 2006 budget. These estimates take the policies in the Administration's budget and recalculate their effect using CBO's underlying assumptions and budget estimating methods. CBO's estimates produced smaller deficits than the Administration for FY2005 through FY2007. They were essentially the same in FY2008 and were larger than the Administration's deficits in FY2009 and FY2010. The full CBO report (An Analysis of the President's Budgetary Proposals for Fiscal Year 2006, March 2005) contained more details, an extended discussion of CBO's calculations, CBO's estimates of the President's proposals, and revised baseline estimates. During the week of March 7, 2005, both the House and Senate Budget Committees adopted their respective versions of the budget resolution for FY2006 (H.Con.Res. 95; S.Con.Res. 18), on party-line votes. Both resolutions followed the general outline of the Administration's proposals: constraining discretionary spending; cutting the growth of some entitlement programs; and extending or making permanent various tax cuts, and some additional tax reduction. The House and Senate adopted their resolutions on March 17. The House, after defeating several substitutes, adopted the budget resolution as approved by the HBC. The Senate, after debate and a number or amendments, including increasing the size of the tax cut covered by the reconciliation instructions, reducing the mandatory spending cuts (from baseline estimates), and increasing the discretionary spending caps, adopted its budget resolution. Resolving some of the differences between the House and Senate resolution became more difficult than initially hoped. By the end of April, the House and Senate leadership had reached an agreement on the FY2006 budget resolution. A conference committee reported (H.Rept. 109-62) the agreement on April 28, 2005, which was quickly (on the same day) adopted by the House and Senate. The House and Senate committees affected by the resolution's three sets of reconciliation instructions (reducing mandatory spending, reducing revenues, and raising the debt limit) are scheduled to report during September 2005. (In September, the congressional leadership pushed the reporting date for the reconciliation legislation into late October, responding to demands on Congress as it attempted to finish the FY2006 appropriations, responded to Hurricane Katrina, and the Senate held hearings on a new Chief Justice.) CRS-9 By July 4, 2005, the House had passed all 11 of its regular appropriation bills for FY2006. The Senate had passed three of its twelve regular appropriation bills. The Senate continued considering its appropriation bills through the rest of the summer. At the end of July, two appropriations bills (Interior and the Legislative Branch) cleared Congress and were signed by the President. In September, the Senate resumed its consideration of its remaining appropriation bills. By mid-September, the outlook for the timely adoption of the regular appropriations remained unclear. Speculation was widespread that at least one continuing resolution on appropriations (a CR) would be needed at the beginning of FY2006. The differences in the number, coverage, and amounts in the regular appropriation bills for the House and Senate seems to have complicated the already difficult process of adopting the annual appropriations. During the last week of September, the Appropriation Committees indicated that a CR would be needed. The CR that emerged (P.L.109-77; H.J.Res. 68) would run through November 18, 2005, with funding levels varying by spending category. Congress passed, and the President signed, the CR on September 30, 2005. By early November 2005, four regular appropriations had become law with the expectation that most of the rest would be adopted fairly shortly. Another CR became necessary as November 18th approached with two regular appropriations still not enacted. The second CR (P.L.109-105) cleared Congress on November 18 and ran through December 17. A third CR (P.L.109-128; December 18) became necessary as Congress continued to struggle to pass the final two appropriation bills. The third CR ran through December 31. As the Christmas holidays approached, Congress cleared, on December 21, the the final two regular appropriations for the President's consideration (he signed them). One of the two, the Defense appropriation bill, included selected rescissions of approximately $10 million and an across-the-board 1% rescission in FY2006 discretionary budget authority, excluding discretionary authority available to the Department of Veterans Affairs and the administrative expenses related to Social Security. The Senate adopted its first reconciliation bill (S. 1932, the Deficit Reduction Omnibus Reconciliation Act of 2005) on November 3, cutting mandatory spending from baseline estimates by approximately $35 billion over five years. The House, after extensive tweaking by the House leadership, passed its spending reconciliation bill (H.R. 4241, the Deficit Reduction Act of 2005) on November 18, cutting mandatory spending by $50 billion (from baseline levels) over five years. A conference report (H.Rept.109-362) on the spending reduction reconciliation bill (S. 1932) was filed at 1 a.m. on December 19. At 6 a.m. that same morning, the House had passed the agreement. The Senate began considering the conference report on December 20. The Senate upheld points of order against several sections of the legislation, effectively rejecting the conference report. The Senate then agreed to the House amendment to S. 1932 with a further amendment on December 21. The changes sent the bill back to the House for further action. The House adopted the CRS-10 Senate changes on February 1, 2006 and sent the legislation to the White House. The President signed the bill into law (P.L. 109-171) on February 8, 2006.5 On November 18, the Senate passed a revenue reducing reconciliation bill (S. 2020, the Tax Relief Act of 2005). The bill would extend or make permanent existing tax cuts and reduce revenues from baseline levels by an estimated $58 billion over five years. The House passed its five-year, $56 billion revenue reducing reconciliation bill (H.R. 4297, the Tax Relief Extension Reconciliation Act of 2005) on December 8. The Senate took up the House bill, amended it, passed it on February 2, 2006, and sent it back to the House. The House- and Senate-appointed conferees resolved the differences on May 9, 2006 (H.Rept. 109-455). The House (On May 10) and the Senate (on May 11) passed the conference agreement. The President signed the bill into law (P.L. 109-222) on May 17. The legislation would reduce revenues by an estimated $70 billion over five years (from FY2006 through FY2010). The net effect of the spending and revenue reducing reconciliation bills would increase the cumulative five-year deficit by billions of dollars above what it would have been without the legislation. The House, at the request of the Administration, adopted a $92 billion supplemental appropriation bill (H.R. 4939) for FY2006 on March 19, 2006. The bill would provide additional funding for military activities in Iraq and Afghanistan and hurricane recovery, along with a number of other smaller items. The Senate, after amending the bill and raising its funding to almost $110 billion, passed it on May 4, 2006. A conference committee to resolve the differences between the House and Senate versions of the bill proved difficult. The President threatened to veto any bill exceeding his request. The committee reported an agreement (H.Rept. 109-494) providing $94.5 billion on June 8, 2006. The House passed the agreement on June 13. The Senate passed it and the President signed it (P.L.109-234) on June 15. The Senate adopted its version of the FY2007 budget resolution (S.Con.Res. 83), containing revised budget numbers for FY2006, on March 16, 2006. The House Budget Committee adopted its version of the FY2007 budget resolution (H.Con.Res. 376), also with revisions to the FY2006 budget, on March 29. After an extended delay, the House passed its budget resolution on May 18. Significant differences in the two resolutions, along with time constraints, have discouraged expectations of any eventual agreement between the House and Senate on the FY2007 budget resolution. Outlays The Administration's FY2006 budget proposed $2,568 billion in outlays for FY2006, rising to $3,028 billion in FY2010, the last year shown in the President's budget. The Administration's proposals, if adopted, would have raised outlays by 5 A drafting error in the legislation resulted in the House and Senate passing nonidentical bills. The legislation may need to be revisited to resolve the issue. CRS-11 $83 billion (3.6%) above the Administration's FY2005 outlay estimate and by 17.9% from FY2006 to FY2010. Table 2. Outlays for FY2004-FY2010 and FY2015 (in billions of dollars) FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2015 CBO Baseline, 1/05 . . . . . . . . . . 2,292 a 2,425 2,507 2,618 2,743 2,869 2,996 3,706 President's FY06 Budget, 2/05 . . . . . . . . . 2,479 2,568 2,656 2,758 2,883 3,028 -- President's FY06 CSB, 2/05 . . . . . . . . . . . 2,443 2,539 2,650 2,770 2,897 3,048 -- CBO, Revised Baseline, 3/05 . . . . . . . . . . . 2,444 2,538 2,621 3,731 2,860 2,987 3,777 CBO, EPP 3/05 . . . . . . . . . . . . . . . . . . . . . 2,451 2,542 2,629 2,742 2,872 2,999 3,796 House FY06 Budget Resolution, 3/05 . . . . 2,451 2,571 2,635 2,743 2,864 2,987 -- Senate Budg. Comm. Budg. Res., 3/05 . . . 2,455 2,559 2,651 2,755 2,874 2,999 -- Senate FY06 Budget Resolution 3/05 . . . . 2,455 2,562 2,658 2,760 2,880 3,007 -- Conf. Rept. Budget Resolution 4/05 . . . . . . 2,455 2,577 2,644 2,750 2,873 2,995 -- OMB MSR 7/13/05 . . . . . . . . . . . . . . . . . . 2,472 2,613 2,661 2,750 2,888 3,063 -- CBO Update 8/15/05 . . . . . . . . . . . . . . . . . 2,473 2,595 2,721 2,860 2,997 3,134 3,905 CBO, BEO, Baseline, 1/06 . . . . . . . . . . . . . 2,472 b 2,649 2,732 2,857 2,984 3,105 3,839 OMB, Budget Proposals, 2/06 . . . . . . . . . . -- 2,709 2,770 2,814 2,922 3,061 -- OMB, Budget, CSB, 2/06 . . . . . . . . . . . . . -- 2,669 2,701 2,798 2,925 3,050 -- CBO, Revised Baseline 3/06 . . . . . . . . . . . -- 2,648 2,726 2,849 2,968 3,099 3,822 CBO, EPP 3/06 . . . . . . . . . . . . . . . . . . . . . -- 2,675 2,766 2,820 2,906 3,017 3,812 Senate FY2007 Budget Res.3/06 . . . . . . . . -- 2,675 2,795 2,843 2,923 3,030 -- House FY2007 Budget Res. 5/06 . . . . . . . . -- 2,675 2,771 2,825 2,914 3,022 -- OMB MSR 7/06 . . . . . . . . . . . . . . . . . . . . . -- 2,696 2,798 2,847 2,929 3,053 -- CBO Update, Baseline 8/06 . . . . . . . . . . . . -- 2,663 2,801 2,945 3,079 3,217 3,979 Actual Outlays for FY2006 . . . . . . . . . . . . -- 2,654 -- -- -- -- -- a. Actual outlays for FY2004. b. Actual outlays for FY2005 BEO -- Budget and Economic Outlook EPP -- CBO's estimates of the President's proposals. CSB -- The Administration's current services baseline. MSR -- OMB's Mid-Session Review. Update -- CBO's The Budget and Economic Outlook: an Update. Measured against the Administration's FY2006 current services baseline outlay estimates, the proposed level of outlays grow by $29 billion (1.1%). The difference between the current services baseline outlay estimate and proposed outlays for FY2006 indicates the "cost" of the Administration's proposed policies. The year-to- year change (the $83 billion increase) combines the "costs" of policy changes from year to year with the relatively automatic growth in large parts of the budget. These automatic increases include cost-of-living adjustments, growth in populations eligible for program benefits, and inflation driven cost of goods and services bought by the government. CRS-12 As it did in last year's budget, the Administration modified some of the Discretionary and Mandatory underlying policy assumptions increasing its Spending current services baseline estimates for FY2006.6 The modifications had a relatively The President's budget includes, in its minor effect on the current services outlay glossary, the general definition of estimates this year. discretionary spending as "budgetary resources ... provided in appropriation The President's budget did not include acts." Mandatory spending is defined the estimated costs of ongoing action in as "spending controlled by laws other Afghanistan or Iraq after the end of FY2005 than appropriations acts." (except for outlays flowing from the Currently, discretionary spending s u p p l e m e n t a l a p p r o p r i a t i o n t h e produces 38% of total outlays (42% of Administration proposed for FY2005 -- see total discretionary spending is for below). Although unknown, the amount is defense) and mandatory spending, unlikely to be zero. This implies that the including net interest, produces the Administration's initial outlay estimate for other 62% (net interest is FY2006 (and for the following years) is approximately 8% of total outlays). smaller than actual outlays will be, even if the estimates for the remaining parts of the Discretionary spending is not budget are accurate. A week after the completely discretionary and budget became available, the Administration mandatory spending is not completely mandatory. All government activities proposed, on February 14, 2005, an $82 require some discretionary spending to billion supplemental appropriation (budget pay salaries and other operating authority) mostly for these costs. expenses of the government. The laws Approximately $35 billion of this will underlying mandatory.. spending can become outlays in FY2005 and $25 billion be changed by Congress, altering the in FY2006, with the remaining being spent nature of the programs, how much in following years. Although this produces they spend, and how they are funded. some outlays for the war on terror in FY2006, the Administration is expected to request another supplemental (although when is unclear) specifically for FY2006. As shares of gross domestic product (GDP), the Administration's proposals showed outlays falling from 19.9% of GDP in FY2006 to 19.0% of GDP in FY2010. CBO's estimate of the President's outlay proposals (March 2004) showed the shares falling from 19.7% of GDP in FY2006 to 19.0% of GDP in FY2010, before rising to 19.3% of GDP in FY2015. These outlays-as-shares-of-GDP are below both the average from FY1980 through FY2004 (21.0% of GDP) or the average from FY1990 through FY2004 (20.2% of GDP). CBO's baseline estimates showed outlays falling from 19.5% of GDP in FY2006 to 19.0% of GDP in FY2010 and sliding slightly to 6 The current services baseline estimates, like CBO's baseline estimates, are designed to provide "a neutral benchmark against which policy proposals can be measured." For outlays, the modified baseline used this year assumes emergencies are one-time only, that federal pay adjustment assumptions reflect the (usual) January 1 start of inflation adjusted raises rather than October 1, and the debt service (interest payment) changes resulting from these (and revenue related) modifications are included in the baseline. CRS-13 18.9% of GDP in FY2015. Using two of CBO's alternative scenarios for spending -- assuming the phase-down of activities in Iraq and Afghanistan over a number of years and that total discretionary spending increases at the rate of nominal GDP growth (rather than the rate of inflation), outlays as shares of GDP would rise from 20.1% of GDP in FY2006 to 21.0% of GDP in FY2015. Figure 2 shows baseline outlays from CBO's FY2007 (in early 2006) budget update (August 2006), an alternative estimate based on data in the CBO report, CBO's estimates of the President's February 2006 policy proposals (March 2006), and OMB's outlay estimates from its July 2006 Mid-Session Review. In addition, average outlays for the FY1965 through FY2005 period (20.5%) are also shown. The FY2000-FY2005 data are the actual amounts for those years. The data are in percentages of GDP. CBO's baseline outlays slowly decline (unsteadily) as a share of GDP through the period before settling just under 20% of GDP. After an upward bump in outlays in FY2006, CBO's analysis of the Figure 2. Outlays, FY2000-FY2015 Administration's proposals showed (as percentages of GDP) outlays falling until FY2012 before 21% climbing to just over 19% of GDP in FY2015. The Administration's 20% proposed constraints on non-defense discretionary spending and some 19% limited slowing in mandatory spending growth produced most of the drop in CBO's estimates of the 18% Administration's proposals. Both CBO's baseline and its estimates of Actuals, FY2000-FY2005 17% OMB policy proposals leave outlays Alternative Estimate CBO Baseline below their FY2006 outlay level and CBO Reestimates of OMB below the FY1965-FY2005 outlay 16% OMB MSR average throughout the forecast Average, FY1965-FY2005 period. The alternative estimate, 15% based on CBO's August 2006 estimates , incorporates the 14% 8/2006 assumption that discretionary 2000 2005 2010 2015 spending will grow faster than in the baseline, that there will be phased reduction in spending for military activities in Iraq and Afghanistan, and that these (and other policy differences) will increase net interest payments. Beginning in FY2010, outlays in the alternative estimate rise almost steadily to nearly 21% of GDP in FY2015, above the FY1965- FY2005 outlay average.7 7 The alternative estimate includes the associated higher interest payments resulting from larger deficits because of the higher spending. For consistency with the following two sections, the alternative estimate also includes the higher debt servicing costs associated with the alternative, and lower, receipt estimates shown in Figure 3. CRS-14 The House and Senate FY2006 budget resolutions (H.Con.Res. 95; S.Con.Res. 18; Spring 2005) and the conference agreement held total outlay growth to less than 5% from FY2005 to FY2006. For the period FY2005 through FY2010, the resolutions showed outlays growing at a 3.8% to 4.1% annual rate. These outlay totals included, in the Allowances function, $50 billion in budget authority and $32 billion in outlays for FY2006 (that is expected to used for the global war on terror).8 No additional funding was assumed or provided for the war on terror in the budget resolutions in subsequent years. The reduction proposed for discretionary spending (and non-defense discretionary spending in particular) in the budget resolution conference agreement differs markedly from the growth in mandatory spending and total outlays. Total outlays grow at an average annual rate of 3.8% between FY2006 and FY2010. Mandatory spending grows at an average annual rate of 6.1% (even with the reduction in mandatory spending proposed in the reconciliation instructions).9 Total discretionary spending over the period would actually fall at an average annual rate of 0.3%. Discretionary defense spending would grow at an average annual rate of 3.1%, even without assumptions about future spending for operations in Iraq and Afghanistan or the global war on terror. Since defense discretionary spending grows, non-defense discretionary spending must fall fairly rapidly for total discretionary spending to fall, and it does. Non-defense discretionary spending falls at an average annual rate of 3.5% from FY2006 to FY2010. The proposed reduction in non- defense discretionary spending would cut it both per capita and as a percentage of GDP. The two resolutions and the conference agreement included reconciliation instructions to slow (barely) growth in mandatory spending between FY2006 and FY2010. The House instructions were for $69 billion in savings while the Senate included $17 billion in mandatory spending savings. The conference agreement included $35 billion in mandatory savings for the FY2006 through FY2010 period. The conference agreement also included a discretionary spending cap for the House of $917 billion in outlays ($843 billion in budget authority) for FY2006, similar to the discretionary spending levels included in the House and Senate versions of the budget resolution for FY2006. The cap did not include the $50 billion allowance that is expected to become a defense supplemental appropriation sometime during the year. 8 The effect of the supplemental in FY2005 and the one allowed for in FY2006 boosts defense budget authority and outlays in those two years compared to the amounts in subsequent years through FY2010. The result is a peak in defense funding in FY2006 followed by reductions in defense funding. Excluding the additional funding in FY2005 and FY2006, defense spending would grow slowly throughout the five-year period. 9 Between FY2006 and FY2010, the budget resolution shows cumulative mandatory spending totaling $9.068 trillion. The $34 billion five-year reduction in mandatory spending in the reconciliation instructions is 0.37% (a little over one third of one percent) of cumulative mandatory spending over the period. CRS-15 The Administration's Mid-Session Review (MSR; OMB; July 13, 2005) increased the FY2006 outlay estimates by $46 billion over the President's outlay estimates in the FY2006 budget in February. Most of the increase ($37 billion) came from additional war funding; the rest was a combination of small policy changes and the effect of technical and economic revisions on outlays. The inclusion of the Administration's proposed Social Security policy changes (the proposed personal or private accounts) raised the new outlay estimates above the Administration's previous estimates, beginning in FY2009. As has been the Administration's practice, the MSR did not include any estimates for future costs for the operations in Iraq and Afghanistan. Such costs, which are likely to occur in future years, will raise outlays in those years above the levels shown in the MSR. CBO's mid-year Update (August 2005) revised FY2006 outlays upward by $84 billion, most of which reflected the adoption of the defense supplemental earlier in 2005. Because the baseline rules require CBO to assume the repetition of the supplemental each year in its forecast, outlays in all the years were larger than in the March 2005 CBO baseline estimates. CBO estimates using alternative assumption that reduce funding for Iraq and Afghanistan and the war on terror over a period of time, produced 10-year cumulative outlay estimates that were $705 billion smaller (including interest savings) than the cumulative 10-year baseline estimates. Congress passed a continuing resolution on appropriations (P.L.109-77; H.J.Res. 68; CR) as FY2005 ended, September 30, 2005. The CR funded governmental activities through November 18, 2005, that were not already funded by permanent authority or by an FY2006 regular appropriation. The CR funded most activities at the lower of the House- or Senate-passed appropriation, or the FY2005 rate of spending. A second CR (P.L.109-105), lasting through December 17, was adopted as the first one expired. Two of the regular appropriations remained unfinished. After adopting a third CR (P.L. 109-128; H.J.Res 72), which the President signed on December 18, 2005, Congress cleared the final two regular appropriation bills for FY2006 just before Christmas. (The FY2006 defense appropriations contained, in addition to defense appropriations and authorization, a reallocation in Hurricane Katrina recovery funds, emergency funding for avian flu preparedness, and an $8.5 billion across-the-board discretionary spending cut.) Both the House and Senate passed spending reduction reconciliation bills (H.R. 4241 and S. 1932 respectively) in November. They would produce a net reduction in spending, from baseline levels, in a selection of mandatory spending programs of between $35 billion and $50 billion over five years. The reductions would be approximately $5.5 billion in FY2006. The bills included spending increases as well as spending reductions and differed substantially from each other. The conference report (H.Rept. 109-362; December 19) would reduce mandatory spending by approximately $40 billion over five years. The House passed the conference report on December 21, 2005. On December 21, the Senate, after supporting points of order against sections of the conference report, rejected the conference report. On the same day, the Senate agreed to the House amendment to S. 1932 with a further amendment containing the conference agreement minus the provisions that violated the Senate point of order. The House agreed to the Senate amendment on February 1, 2006, early in the second session of the 109th Congress. The cleared legislation was signed by the President on February 8, 2006 (P.L. 109-171). CRS-16 The Congressional Budget Office and the Administration released revised outlay estimates for FY2006 with their respective budget reports for FY2007. The President's FY2007 had revised FY2006 total outlays of $2,709 billion, $95 billion higher than the Administration's estimate in its Mid-Session Review in July 2005 (of $2,613 billion). Much of the increase in estimated outlays resulted from the supplementals for military activities in Iraq and Afghanistan and expected spending for hurricane relief and recovery. CBO's baseline outlay estimate for FY2006 rose from $2,595 billion in August 2005 to $2,649 billion in January 2006. Most of CBO's increase came from legislative changes, essentially the same ones as the Administration cited. The Administration's revisions for FY2006 included a proposed supplemental for the war on terror and additional recovery from the summer of 2005 hurricane damage. The House passed a supplemental appropriation (HR. 4939) that followed the President's proposal and would add approximately $95 billion to FY2006 budget authority. The Senate modified the House bill, adding funds for additional domestic spending, and passed the almost $110 billion plus bill on May 4, 2006. The conference on the bill reached agreement in early June providing almost $95 billion in additional budget authority. The President signed the agreement on June 15, 2006 (P.L.109-234). The July 2006 MSR reduced outlay estimates by approximately $12 billion below (less than a 0.5% decline) the Administration's February 2006 outlay estimates. OMB attributed almost all the change to non-policy causes. The MSR also showed outlays falling as a percentage of GDP from 20.6% of GDP in FY2006 to 18.8% of GDP in FY2011. Non-defense, non-homeland security discretionary spending would fall from 3.8% of GDP in FY2006 to 2.6% of GDP in FY2011, an amount well below historical levels. Even defense spending would fall over the period, from 3.9% of GDP to 2.9% of GDP. Achieving these reductions would require a reversal in the pattern of spending since FY2000 (see Figure 2) and possibly unprecedented constraints and reductions in discretionary spending. The Administration's outlay estimates would reduce discretionary spending, as a percentage of GDP, in real terms, and as measured per capita, to their lowest levels since World War II. CBO's August 2006 Update raised FY2006 baseline outlays by $14 billion, a combination of higher spending coming from legislation and lower spending coming from changed technical assumptions. The changes had little effect on FY2006 outlays as a percentage of GDP (raising them from 20.2% to 20.3%). Over the period covered by the CBO projections, FY2006 through FY2016, outlays would be larger in each year by as much as 0.8% of GDP. Final outlay numbers for FY2006 were $2,654 billion, $182 billion larger than in FY2005 and $86 billion above the President's original request (February 2005). They were smaller than the Administration's outlay estimates made in 2006. CRS-17 Receipts The Administration's FY2006 budget proposed extending and making permanent many of the tax cuts adopted in the first term that otherwise would expire (as required by law), mostly in 2010. The change, incorporated in the Administration's receipt proposals, produced relatively little change from the Administration's baseline estimates. Much of the budgetary effect of making the tax cuts permanent would not occur until after FY2010, the last year shown in the budget. The Administration estimated that making the cuts permanent would reduce receipts by $53 billion between FY2006 and FY2010 and by $1.0 trillion between FY2011 and FY2015. CBO's estimate of these proposals put the cost at $143 billion for the FY2006 through FY2010 period and $1.5 trillion for the FY2011 through FY2015 period.10 Table 3. Receipts for FY2004-FY2010 and FY2015 (in billions of dollars) FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2015 CBO Baseline, 1/05 . . . . . . . . . . 1,880 a 2,057 2,212 2,357 2,508 2,662 2,806 3,847 President's FY06 Budget, 2/05 . . . . . . . . . 2,053 2,178 2,344 2,507 2,650 2,821 -- President's FY06 CSB 2/05 . . . . . . . . . . . . 2,053 2,178 2,347 2,518 2,668 2,841 -- CBO, Revised Baseline, 3/05 . . . . . . . . . . . 2,057 2,213 2,357 2,508 2,662 2,807 3,847 CBO, EPP 3/05 . . . . . . . . . . . . . . . . . . . . . 2,057 2,210 2,350 2,492 2,625 2,770 3,540 House, FY06 Budget Resolution, 3/05 . . . . 2,057 2,195 2,331 2,496 2,635 2,784 -- Senate Budg. Comm. Budg. Res., 3/05 . . . 2,057 2,197 2,352 2,496 2,638 2,792 -- Senate, FY06 Budget Resolution 3/05 . . . . 2,057 2,193 2,343 2,483 2,623 2,775 -- Conf. Agree. Budget Resolution 4/05 . . . . 2,057 2,195 2,331 2,496 2,635 2,784 -- OMB MSR 7/13/05 . . . . . . . . . . . . . . . . . . 2,140 2,273 2,428 2,588 2,727 2,893 -- CBO Update 8/15/05 . . . . . . . . . . . . . . . . . 2,142 2,280 2,396 2,526 2,675 2,817 3,848 CBO, BEO, Baseline, 1/06 . . . . . . . . . . . . . 2,154 b 2,312 2,461 2,598 2,743 2,883 3,912 OMB, Budget Proposals, 2/06 . . . . . . . . . . -- 2,285 2,416 2,590 2,714 2,878 -- OMB, Budget, CSB, 2/06 . . . . . . . . . . . . . -- 2,301 2,444 2,597 2,729 2,901 -- CBO, Revised Baseline 3/06 . . . . . . . . . . . -- 2,313 2,461 2,598 2,743 2,883 3,913 CBO, EPP 3/06 . . . . . . . . . . . . . . . . . . . . . -- 2,304 2,431 2,585 2,712 2,852 3,608 Senate FY2007 Budget Res.3/06 . . . . . . . . -- 2,303 2,433 2,593 2,735 2,870 -- House FY2007 Budget Res. 5/06 . . . . . . . . -- 2,303 2,422 2,590 2,723 2,869 -- OMB MSR 7/06 . . . . . . . . . . . . . . . . . . . . . -- 2,400 2,459 2,659 2,772 2,930 -- CBO Update, Baseline 8/06 . . . . . . . . . . . . -- 2,403 2,515 2,672 2,775 2,890 3,922 Actual Receipts for FY2006 . . . . . . . . . . . . -- 2,407 -- -- -- -- -- a. Actual receipts for FY2004. b. Actual receipts for FY2005. BEO -- Budget and Economic Outlook. EPP -- CBO's estimates of the President's proposals. CSB -- The Administration's current services baseline. MSR -- OMB's Mid-Session Review. Update -- CBO's The Budget and Economic Outlook: an Update. 10 These amounts from CBO do not include the outlay effects (usually interest costs associated with larger deficits) of the extensions. CRS-18 Under the initial request, receipts would grow from an estimated $2,178 billion in FY2006 to $2,821 billion in FY2010. The increases continue the dollar growth in receipts that began in FY2004, following three years of dollar declines in receipts (FY2001 through FY2003). Receipts reached their highest level (since World War II) both in dollars ($2,025 billion) and as a percentage of GDP (20.9% of GDP) in FY2000. By FY2003, receipts had fallen for three years in a row in both dollars (to $1,782 billion) and as a percentage of GDP (to 16.4%), with that share of GDP being lower than in any year since FY1955. Receipts grew to $1,880 billion, but fell to 16.3% of GDP in FY2004. The Administration estimated receipts of $2,053 billion (16.8% of GDP) in FY2005, exceeding FY2000 receipts in dollars, and $2,178 billion (16.9% of GDP -- still below recent averages) in 2006 (later estimates raised these amounts). The Administration's proposals did not include extending the current relief from the alternative minimum tax (AMT) after the end of FY2005. Without a further extension, a growing number of middle-class taxpayers will find themselves subject to the AMT.11 CBO estimated (January 2005) that providing extended or permanent AMT relief would reduce receipts by $198 billion between FY2006 and FY2010 and by $395 billion between FY2006 and FY2015. Without some adjustment to the AMT, it will recapture much of the tax reduction provided in the 2001 and 2003 tax cuts.12 The CBO baseline and OMB's proposed and baseline estimates are fairly similar from FY2006 through FY2010. Under both baselines, receipts rise from 16.8% of GDP in FY2005 to between 17.8% (CBO) and 17.7% of GDP (OMB) in FY2010. CBO's baseline, which assumed the scheduled expiration of the tax cuts, extended the projections through FY2015. In the CBO baseline, receipts rise rapidly after FY2010 (the year the tax cuts expire) and reach 19.6% of GDP in FY2015. Using CBO's January 2005 estimates of alternative revenue policies -- to extend the tax cuts and to reform the alternative minimum tax (AMT) -- results in a much slower growth in receipts in dollars and as shares of GDP.13 Receipts still rise as a percentage of GDP, but much more slowly than in the President's proposal or CBO's baseline. By FY2010, the alternative receipts have risen to $2,727 billion and 17.3% of GDP. By FY2015, the alternative estimated receipts rise to $3,508 billion and 17.9% of GDP. CBO's March 2005 estimates of the President's revenue proposals (using CBO's underlying assumptions and budget model) produced numbers similar to 11 For discussions of the AMT issue, see CRS Report RL30149, The Alternative Minimum Tax for Individuals; and CRS Report RS22100, The Alternative Minimum Tax for Individuals: Legislative Initiatives and Their Revenue Effects, both by Gregg A. Esenwein. 12 See CRS Report RS21817, The Alternative Minimum Tax (AMT): Income Entry Points and "Take Back" Effects, by Gregg A. Esenwein, for more information on the interaction of the AMT and the tax cuts. 13 CBO indicates that combining the reform of the AMT and the tax extenders produces an interactive effect that makes the combined loss greater than the sum of the two estimates separately. CRS-19 those in the President's budget (a bit larger in the early years and a bit smaller in the later years of the FY2006 to FY2010 period). The House and Senate budget resolutions followed the lead of the President's budget and included tax cuts or other tax changes for the period FY2006 through FY2010. The resolutions did not address the expiration of the tax cuts in 2010. The House resolution included $106 billion in revenue reductions over five years, $45 billion of which were included in reconciliation instructions. The Senate, in amending the resolution as presented by the Senate Budget Committee, increased the five-year revenue reduction to $129 billion (from $70 billion), all of which was to be included within reconciliation instructions. The conference agreement on the budget resolution included five-year revenue reductions of almost $106 billion, $70 billion of which fell under reconciliation instructions. The FY2006 $11 billion tax reduction under reconciliation (in the budget resolutions) would not be large enough (by an estimated $5 billion) to accommodate all of the tax breaks that expire that year. Among those tax breaks expiring is the relief from the Alternative Minimum Tax (AMT) for many (and growing) middle-class taxpayers. The House Ways and Means Committee and the Senate Finance Committees will determine what is included and excluded from the tax cut reconciliation bill that each Chamber will initially consider. Whether a separate tax cut bill, continuing or extending other expiring tax cuts, will be introduced is uncertain. Figure 3 uses data from the CBO FY2007 budget reports of March and August 2006 and OMB's July 2006 MSR. The data show receipts as percentages of GDP for fiscal years 2000 through 2015 Figure 3. Receipts, FY2000-FY2015 (projected; the data for FY2000- FY2005 are the actual levels). (as percentages of GDP) Average actual receipts for FY1965 21% through FY2005 are included in the figure (the horizontal line at 18.2% 20% of GDP). The CBO baseline estimate and CBO's reestimates of 19% the President's proposals (from the FY2007 budget) follow similar (but 18% separate) paths through FY2010. CBO's baseline assumed that, as 17% required by current law, the 2001 and 2003 tax cuts expire after 2010 and 16% Actuals, FY2000-FY2005 that there is no fix to the future CBO Baseline expansion in coverage of the AMT. OMB MSR These assumptions raise receipts 15% CBO Reestimates of OMB Alternative Estimate rapidly after FY2010, to 19.6% of Average, FY1965-FY2005 GDP in FY2015 (more than 1½ 8/200 14% percentage points of GDP). The 2000 2005 2010 2015 Administration's policy assumed the tax cuts would be extended, resulting in receipts varying around 18% of CRS-20 GDP after the decline in share from FY2006 to FY2007. The alternative estimate used CBO's August 2006 alternative scenarios that assume the tax cuts are extended and that the AMT relief is adjusted annually. This alternative outlook for receipts showed them slowly falling after FY2006 (18.3% of GDP) to approximately 17.5% of GDP, where they stay for the rest of the period.14 Average receipts over the FY1965-FY2005 period (18.2% of GDP) are larger than either the CBO reestimate of the President's policy proposals or the alternative estimate (except in FY2006) throughout the period shown. The President's FY2007 budget (February 2006), like his FY2006 budget, assumed that the 2001 and 2003 tax cuts would be made permanent, but the effect on receipts of making them permanent shows little effect until after FY2010. The budget would extend the alternative minimum tax (AMT) relief only through FY2007. If Congress and the President continue adjusting the Alternative Minimum Tax (AMT) to provide relief to middle-class taxpayers in subsequent years, receipts will be smaller in future years than shown in the budget. The tax reduction reconciliation bills adopted by the Senate (S. 2020) and the House (H.R. 4297) late in 2005 would reduce FY2006 revenues by between $6 billion and $11 billion and by between $56 billion and $70 billion over five years. The Senate substituted the text of its bill for that of the House bill, adopting the amended version of H.R. 4297 on February 2, 2006. The House and Senate had appointed conferees by mid-February 2006. The conferees reported an agreement on May 9, 2006. It would reduce revenues by $70 billion over five years. Congress sent the legislation to the President who signed it on May 17, (P.L. 109-222). The Senate-passed FY2007 budget resolution (S.Con.Res. 83; March 16, 2006) had receipts of $2,303 billion for FY2006, $10 billion below CBO's March 2006 baseline but almost $110 billion higher than in the FY2006 budget resolution (H.Con.Res. 95). The House Budget Committee's version of the FY2007 budget resolution (H.Con.Res. 376; March 29, 2006) also showed receipts of $2,303 billion for FY2006. (The House passed its resolution on May 18.) The Administration's July 2006 MSR had FY2006 receipts of $2,400 billion, $115 billion (5.0%) larger than it had estimated receipts in February 2006. Almost all of the increased receipt estimate resulted from changes in economic assumptions and technical reestimates rather than policy changes. OMB stated that increased individual and corporate income taxes produced most of the total receipt estimate increases. The updated estimates raised the growth in receipts between FY2005 and FY2006 from 6.1% in the February 2006 to 11.4% in the MSR. The update also reduced the growth in estimated receipts between FY2006 and FY2007 from 5.7% in February to 2.4%. In general, the components of receipts grow by significant percentages between FY2005 and FY2006, but grow by much smaller amounts or actually shrink between FY2006 and FY2007, according to data in the MSR. 14 By FY2015, CBO's baseline and the alternative estimate are almost 2% of GDP and over $400 billion apart. CRS-21 CBO's August 2006 budget report included similar FY2006 receipts to those in OMB's MSR. It also reported a large, unexpected surge in receipts during FY2006, and for the same reasons as cited by OMB (income taxes, both corporate and individual). After FY2006, the CBO's baseline receipt estimates and OMB's receipt estimates diverge, with CBO's estimates being larger (through FY2011) than OMB's. Final receipts for FY2006 were $2,407 billion, $253 billion above FY2005 receipts and $230 billion larger than the President's original request (February 2005). They were also larger than any subsequent estimate made by OMB or CBO (see Table 3). Individual income taxes were 12.6% larger than they were in FY2005 and corporate income taxes were 27.2% larger. A surge in corporate profits and non- withheld income produced much of the growth in income taxes. (Most analysts do not expect the rapid growth in federal receipts to continue.) Deficits (and Surpluses) Deficits and surpluses are the residuals left after Congress and the President set policies for spending and receipts. Surpluses, in which receipts are greater than outlays, reduce federal debt held by the public, which can lead to lower net interest payments (among other effects). Deficits, in which outlays exceed receipts, increase government debt held by the public, generally increasing net interest payments (assuming no change in interest rates). Reducing the deficit and eventually reaching a balanced budget or generating and keeping a surplus (the government had its first surplus in 30 years in FY1998) was a major focus of the budget debates in the late 1980s and throughout the 1990s. The President's FY2006 budget proposals (February 2005) had estimates of the FY2006 deficit falling to $390 billion (3.0% of GDP) from an FY2005 deficit of $427 billion (3.5% of GDP). The deficit would fall to an estimated $207 billion (1.3% of GDP) in FY2010. The President's budget indicated that its policies, if adopted, would halve the deficit as a percentage of GDP by the end of FY2010. This goal would likely not be reached if additional AMT relief is implemented, additional defense supplementals are adopted, or non-defense discretionary spending grows rather than falls after FY2006. Achieving the Administration's deficit reduction proposals would require, over five years, strict limits on the growth in domestic discretionary spending, a modest reduction (from baseline estimates) in some entitlements, slowing defense spending growth, and letting AMT relief to lapse after 2005. The proposals included some revenue-reducing tax cuts, increasing other changes needed to reduce the deficit.15 An inability to hold to these spending and revenue levels, a task that has proven difficult in the past, would result in larger deficits than those expected in the President's budget. 15 The Administration's current services baseline estimate, which assumes current policy, had smaller deficits in each year through FY2009 (and the same sized deficit in FY2010) than the President's proposed budget. The cumulative five-year deficit would be smaller without the President's proposed policy changes than with them. CRS-22 Table 4. Surpluses/Deficits(-) for FY2004-FY2010 and FY2015 (in billions of dollars) FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2015 CBO Baseline, 1/05 . . . . . . . . . -412a -368 -295 -261 -235 -207 -189 141 President's FY06 Budget, 2/05 . . . . . . . . -427 -390 -312 -251 -233 -207 -- President's FY06 CSB 2/05 . . . . . . . . . . . -390 -361 -303 -251 -229 -207 -- CBO Revised Baseline 3/05 . . . . . . . . . . . -365 -298 -268 -246 -219 -201 122 CBO EPP 3/05 . . . . . . . . . . . . . . . . . . . . . -394 -332 -278 -250 -246 -229 -256 House FY06 Budget Resolution, 3/05 . . . -394 -376 -304 -247 -229 -203 -- Senate Budg. Comm. Budg. Res., 3/05 . . -397 -361 -299 -258 -236 -208 -- Senate, FY06 Budget Resolution, 3/05 . . -397 -368 -315 -277 -257 -232 -- Conf. Agree. Budget Resolution 4/05 . . . -398 -383 -313 -254 -238 -211 -- OMB MSR 7/13/05 . . . . . . . . . . . . . . . . . -333 -341 -233 -162 -162 -170 -- CBO Update 8/15/05 . . . . . . . . . . . . . . . . -331 -314 -324 -335 -321 -317 -57 CBO, BEO, Baseline, 1/06 . . . . . . . . . . . . -318 b -337 -270 -259 -241 -222 73 OMB, Budget Proposals, 2/06 . . . . . . . . . -- -423 -354 -223 -208 -183 -- OMB, Budget, CSB, 2/06 . . . . . . . . . . . . -- -367 -257 -201 -196 -149 -- CBO, Revised Baseline 3/06 . . . . . . . . . . -- -336 -265 -250 -224 -216 91 CBO, EPP 3/06 . . . . . . . . . . . . . . . . . . . . -- -371 -335 -236 -194 -165 -204 Senate FY2007 Budget Res.3/06 . . . . . . . -- -372 -363 -260 -197 -160 -- House FY2007 Budget Res.. 5/06 . . . . . . -- -372 -348 -235 -191 -153 -- OMB MSR 7/06 . . . . . . . . . . . . . . . . . . . . -- -296 -339 -188 -157 -123 -- CBO Update, Baseline 8/06 . . . . . . . . . . . -- -260 -286 -273 -304 -328 -56 Actual Deficit for FY2006 . . . . . . . . . . . . -- -248 -- -- -- -- -- a. Actual deficit for FY2004. b. Actual deficit for FY2005. BEO -- Budget and Economic Outlook EPP -- CBO's estimates of the President's proposals. CSB -- The Administration's current services baseline. MSR -- OMB's Mid-Session Review. Update -- CBO's The Budget and Economic Outlook: An Update. CBO's March 2005 estimates of the President's proposals put the FY2005 deficit at $394 billion (3.2% of GDP) and the FY2006 deficit at $332 billion (2.6% of GDP). Both are below the deficits for those years proposed in the budget. CBO's reestimated deficits are below the Administration's deficits through FY2008 and larger than the Administration's deficit estimates in FY2009 and FY2010. CBO extended its projections of the President's policies through FY2015 (the President's budget estimates ended with FY2010). The House and Senate FY2006 budget resolutions, in following the Administration's lead, showed declining deficits throughout the five years covered by the resolution. The conference agreement on the resolution followed the same pattern. The differences among these deficit estimates were slight (see Table 4). The conference agreement set a FY2006 deficit of $383 billion (3.0% of GDP) falling to $211 billion (1.1% of GDP) in FY2010. CRS-23 Figure 4 shows deficit estimates as shares of GDP for FY2000 through FY2015 based on actual data (for FY2000-FY2005) and data from CBO's March and August 2006 budget reports and OMB's July 2006 MSR.16 The CBO baseline deficit estimate is the combination of the baseline receipt and outlay estimates. The CBO baseline requires the assumption that the 2001 and 2003 tax cuts expire (as currently scheduled) in 2010, that there are no future adjustments to lessen the expanding coverage of the AMT, that there are adjustments to non-defense discretionary spending for inflation, and that the supplemental adopted in 2006 is repeated annually. Under these assumptions, the CBO August baseline deficit fell to almost 0% of GDP in FY2012, and stayed there. CBO's estimates of the President's policies (in his FY2007 budget, February 2006) showed the deficit falling from FY2006 to FY2010, to near 1% of GDP, and remaining near 1% of GDP through FY2015. The President's budget had estimates through FY2011; CBO extended the Figure 4. Surplus/Deficit (-), projections through FY2015. The FY2000-FY2015 Administration's proposal to make (as percentages of GDP) the tax cuts permanent has little -5% effect on the deficit estimates until after FY2010. Both CBO's baseline -4% and its estimates of the President's policies show the deficit falling -3% below the average deficit (2.3% of -2% GDP) over the FY1965-FY2005 period. -1% The July 2006 OMB MSR 0% showed deficits falling steadily as a Actuals, FY2000-FY2005 share of GDP after FY2007 (see 1% Alternative Estimate Figure 4). After a drop from CBO Reestimates of OMB FY2005 to FY2006, the deficit (as a 2% OMB MSR CBO Baseline percentage of GDP) rises in FY2007. Average, FY1965-FY2005 After FY2007, the Administration's 3% July 2006 budget report showed the 4% 8/2006 deficit falling steadily as a share of GDP through FY2011. The 2000 2005 2010 2015 Administration's estimate assumed almost no additional funding for military operations in Iraq and Afghanistan, no further relief from expanding alternative minimum tax coverage, and almost no growth in discretionary spending. If these assumptions do not hold (many analysts do not believe they accurately predict future policy), the deficit will be larger. The alternative baseline in Figure 4 used selected estimates of alternative policies created by CBO (that reflect faster discretionary spending growth, extending the expiring tax cuts, retaining relief from the AMT, and incorporating increased debt 16 Note that in the chart, increasing deficits move up while decreasing deficits (or increasing surpluses) move down. CRS-24 servicing costs). Under these assumptions, the deficit estimates remained between 2% and 3% of GDP throughout the period and show a growing trend after FY2012. Under the alternative estimate, the deficit never falls below the FY1965-FY2005 average deficit during the 10-year period. Earlier, the Administration's FY2007 budget (February 2006) repeated the assertion that the deficit will be halved by FY2009 as a percentage of GDP compared to the estimate for the FY2004 deficit produced in February 2004. To achieve this result, discretionary spending must be held almost constant in dollars (excluding defense and homeland security), no relief can be provided from the expanding coverage of the AMT beyond FY2007, legislation would be needed to restrain mandatory spending, and no additional supplemental funding is assumed for the war on terror (or anything else) after FY2007. The July 2006 MSR, using most of the same assumptions as the FY2007 budget, had the deficit fall from -2.3% of GDP in FY2006 to -0.7% of GDP in FY2011. Many analysts questioned the realism of the underlying policy assumptions that the Administration used to achieve the future reduction in the deficit. The Senate-passed budget resolution for FY2007 (S.Con.Res. 83; March 16, 2006) included a revised FY2006 deficit of $372 billion, $11 billion below the deficit in the FY2006 budget resolution. The House-passed FY2007 budget resolution (H.Con.Res. 376; May 18, 2006) had the same amount for the deficit for FY2006 as in the Senate-passed FY2007 resolution. The actual deficit for FY2006 was $248 billion, $70 billion below the FY2005 deficit and $142 billion below the Administration's original FY2006 proposal (February 2005). It was also well below most deficit estimates produced by OMB and CBO during 2005 and 2006. The most recent OMB and CBO budget estimates show the deficit rising in FY2007. After that, OMB shows the deficit falling (because of assumed future policy change while CBO shows it growing through FY2010 under current policies. Most longer-run projections show the deficit growing steadily unless current policies are changed substantially. The Longer Run Over a longer time period, one beginning in the next decade and lasting for decades into future, CBO indicates (in its January 2005 budget documents) that it expects, under existing policies and assumptions, that demographic pressures will produce large and persistent deficits. CBO states In the decades beyond CBO's projection period, the aging of the baby-boom generation, combined with rising health care costs, will cause a historic shift in the United States' fiscal situation.... Driven by rising health care costs, spending for Medicare and Medicaid is increasing faster than can be explained by the growth of enrollment and general inflation alone. If excess cost growth continued to average 2.5 percentage points in the future, federal spending for Medicare and Medicaid would rise from 4.2 percent of GDP today to about 11.5 percent of GDP in 2030.... CRS-25 Outlays for Social Security as a share of GDP are projected to grow by more than 40 percent in the next three decades under current law: from about 4.2 percent of GDP to more than 6 percent.... Together, the growing resource demands of Social Security, Medicare, and Medicaid will exert pressure on the budget that economic growth alone is unlikely to alleviate. Consequently, policymakers face choices that involve reducing the growth of federal spending, increasing taxation, boosting federal borrowing, or some combination of those approaches.17 The Administration indicated similar concerns about the outlook for the budget over the long term but tied much of its discussion to the President's proposed reforms to Social Security. Less was said about Medicare and Medicaid. The short-term budget outlook can change when it is buffeted by economic or policy changes. The long-term budget outlook is expected to be dominated by the expansion of the population eligible for Social Security, Medicare, Medicaid, and other programs for the elderly as the baby boom generation begins retiring in large numbers. The steady price increases experienced by the health programs, if unchanged, could begin to dominate future budget debates. Not only will these programs be affected, but their constant growth will put great stress on the rest of the budget, the government's ability to finance its obligations, and the ability of the economy to provide the resources needed. The tax cuts, spending increases, and policy changes of the last few years have not produced the difficult fiscal future, but they appear to have made an already difficult situation more difficult. The Budget and the Economy The budget and the economy affect each other unequally. Small economic changes have a more significant effect on the budget than the effect large policy changes generally have on the economy. The worse-than-previously-expected economic conditions that lasted from 2001 into 2003, played a minor role, directly and indirectly, in the deterioration of the budget outlook over those years. CBO expects continued economic growth during calendar years 2005 and 2006, which should result in higher revenues and lower spending than would occur if the economy were to grow at a slower rate. Because there is no way of predicting the timing of economic ups and downs, especially as estimates run into the future, CBO projects that GDP will grow at a rate close to potential GDP for the period 2007 through 2015.18 Under governmental policies that are in fiscal balance, a return to normal economic growth (growth close to that of potential GDP) should reduce or eliminate a deficit or produce a surplus. In both the President's budget and in CBO's budget reports, the budget under current policies experiences a shrinking deficit, but does not 17 CBO, The Budget and Economic Outlook: Fiscal Years 2006-2015, Jan. 2004, pp. 10-11. 18 Potential GDP represents an estimate of what GDP would be if both labor and capital were as fully employed as is possible. CRS-26 move into surplus throughout the forecast period. Under CBO's alternative policies, the deficit grows as a percentage of GDP; it does not shrink or disappear during a period of expected normal economic growth. This result implies that the budget, particularly if using the alternative assumptions, has a basic fiscal imbalance that cannot be eliminated by economic growth. To produce a balanced budget or one in surplus requires spending reductions or tax increases. For Additional Reading U.S. Congressional Budget Office. The Budget and Economic Outlook: Fiscal Years 2006-2015. Washington, January 25, 2005. ----. An Analysis of the President's Budget Proposals for Fiscal Year 2006. Washington, March 2005. ----. The Budget and Economic Outlook: An Update. Washington, August 2005. ----. The Long-Term Budget Outlook. Washington, December 2005. U.S. Council of Economic Advisors. The Economic Report of the President. Washington, GPO, February 2005. U.S. Office of Management and Budget. The Budget of the United States Government for Fiscal Year 2006. Washington, GPO, February 7, 2005. ----. The Fiscal Year 2006 Mid-Session Review. Washington, July 2005. CRS Products CRS Report RL32791, Congressional Budget Actions in 2005, by Bill Heniff, Jr. CRS Report RL33132, Budget Reconciliation Legislation in 2005, by Robert Keith. CRS Report RS22322, Taxes and Fiscal Year 2006 Budget Reconciliation: A Brief Summary, by David Brumbaugh. CRS Report RS21992, Extending the 2001, 2003, and 2004 Tax Cuts, by Gregg Esenwein. CRS Report RL30149, The Alternative Minimum Tax for Individuals, by Gregg Esenwein. CRS Report RS22100, The Alternative Minimum Tax for Individuals: Legislative Initiatives and Their Revenue Effects, by Gregg Esenwein. CRS Report RL30839, Tax Cuts, the Business Cycle, and Economic Growth: A Macroeconomic Analysis, by Marc Labonte and Gail Makinen. CRS-27 CRS Report RS21756, The Option of Freezing Non-defense Discretionary Spending to Reduce the Budget Deficit, by Gregg Esenwein and Philip Winters. CRS Report RL30239, Economic Forecasts and the Budget, by Brian W. Cashell. CRS Report RL31235, The Economics of the Federal Budget Deficit, by Brian W. Cashell. CRS Report RL31414, Baseline Budget Projections: A Discussion of Issues, by Marc Labonte. CRS Report 98-560, Baselines and Scorekeeping in the Federal Budget Process, by Bill Heniff, Jr. CRS Report RS20095, The Congressional Budget Process: A Brief Overview, by James V. Saturno. CRS Report RL30297, Congressional Budget Resolutions: Selected Statistics and Information Guide, by Bill Heniff Jr. CRS Report RS21752, Federal Budget Process Reform: A Brief Overview, by Bill Heniff, Jr. and Robert Keith. CRS Report 98-720, Manual on the Federal Budget Process, by Robert Keith and Allen Schick. CRS Report RL30708, Social Security, Saving, and the Economy, by Brian W. Cashell. ------------------------------------------------------------------------------ For other versions of this document, see http://wikileaks.org/wiki/CRS-RL32812