Because this political economy rule involves an asymmetric budget response, the amount of adjustment depends on whether the unified budget
is in surplus or in deficit.
The federal government's unified budget
includes current federal government activities and the receipts and expenditures of various dedicated funds established by legislation.
outlays by function: Four functions--national defense, social security, net interest, and medicare--more than account for the increase in total outlays; on balance, outlays for all other functions decline.
Nonetheless, pressures will mount, and I believe that the growth potential of our economy is best served by maintaining the unified budget
surpluses presently in train and thereby reducing Treasury debt held by the public.
The unified budget
deficit decreases from $146.7 billion in fiscal year 1988 to $129.5 billion in fiscal year 1989 (table 3 and chart 1).
The deficit would have been large enough to push the total federal budget into the red, and an accrual-based budget measure could conceivably record noticeable deficits over the next few years, rather than the surpluses now indicated by the official projections for either the total unified budget
or the on-budget accounts.
.--For fiscal year 1987, a $158.4 billion deficit is estimated, compared with $173.2 billion estimated in January (table 2).
But if the unified budget
is in surplus for a protracted period of years, it is at least conceivable that the outstanding public debt would be eliminated.
receipts in 1988 are $6.1 billion higher than current services receipts, reflecting the administration's proposals to increase receipts as previously discussed (table 4).
Debt held by the public increased during this 4-year period primarily as a result of annual unified budget
Burgeoning receipts, along with continuing restraint on federal spending, produced the first unified budget
surplus in thirty years, allowing the Treasury to begin to pay down the federal debt held by the public.
Revised estimates of Federal unified budget
receipts and outlays for fiscal years 1986 and 1987 were submitted to Congress by the Office of Management and Budget in early August.