Joint Statement of Secretary Lew and OMB Director Burwell on Budget Results for Fiscal Year 2013

10/30/2013 WASHINGTON – U.S. Treasury Secretary Jacob J. Lew and Office of Management and Budget (OMB) Director Sylvia Mathews Burwell today released details of the fiscal year (FY) 2013 final budget results, which show continued and significant progress in reducing the deficit. The deficit in FY 2013 fell to $680 billion, $409 billion less than the FY 2012 deficit and $293 billion less than forecast in President Obama’s April Budget. As a percent of Gross Domestic Product (GDP), the deficit fell to 4.1 percent, representing a reduction of more than half from the deficit that the Administration inherited when the President took office in 2009. [1] In his FY 2014 Budget, the President presented a plan that would make critical investments to strengthen the middle class, create jobs, and grow the economy while continuing to cut the deficit in a balanced way. Building on the $2.5 trillion in deficit reduction already locked in, the President’s plan would replace the economically damaging sequester while achieving additional deficit reduction to put Federal debt on a downward path as a share of the economy. And unlike sequestration, which includes no long-term deficit reduction, the President’s plan includes structural reforms that would generate growing savings in the second decade and beyond. Looking forward, the Administration remains committed to working with Congress to enact proposals that will both strengthen the economy and middle class by making needed investments in education, infrastructure, research and development, and national security, while putting debt as a share of the economy on a downward path. ―Under President Obama, the nation’s deficit has fallen for the past four years, the fastest pace of decline over a sustained period since World War II. It is now less than half of what it was when the President took office,‖ said Treasury Secretary Lew. ―Congress must build on this progress by crafting a pro -jobs and progrowth budget agreement that strengthens the economy while maintaining fiscal discipline.‖ ―We must remain focused on measures that will support the middle class, strengthen the economic recovery, promote the nation’s long-term competitiveness, strengthen national security, and protect the least fortunate among us,‖ said OMB Director Burwell. ―The President’s B udget showed how we can do this while at the same time improving our long-term fiscal outlook.‖ Summary of Fiscal Year 2013 Budget Results Year-end data from the September 2013 Monthly Treasury Statement of Receipts and Outlays of the United States Government show that the deficit for FY 2013 was $680 billion. This represents a decrease of $409 billion, or 38 percent, from last year. As a percentage of GDP, the deficit fell to 4.1 percent, down from 6.8 percent in FY 2012. The FY 2013 deficit of $680 billion was $293 billion or 30 percent less than the estimate in the FY 2014 Budget, and $79 billion or 10 percent less than estimated in the FY 2014 Mid-Session Review (MSR).

Table 1. Total Receipts, Outlays, and Deficit (in billions of dollars) Receipts Outlays Deficit FY 2012 Actual 2,449 3,538 -1,089

Percentage of GDP FY 2013 Estimates: 2014 Budget 2014 Mid-Session Review FY 2013 Actual Percentage of GDP

15.2% 2,712 2,777 2,774 16.7%

22.0% 3,685 3,536 3,454 20.8%

6.8% -973 -759 -680 4.1%

The significant decrease in the deficit from last year was due to a combination of higher receipts and lower outlays in FY 2013. Higher receipts accounted for 79 percent of the decline. Government receipts totaled $2,774 billion in FY 2013. This was $325 billion higher than in FY 2012, an increase of 13 percent. As a percentage of GDP, receipts equaled 16.7 percent, 1.5 percentage points higher than in FY 2012. FY 2013 receipts were $62 billion higher than estimated in the FY 2014 Budget and $3 billion lower than the estimate in the FY 2014 MSR. The increase in receipts from FY 2012 can be attributed to a stronger economy and the expiration of certain tax provisions. Higher wages and salaries made collections of individual and payroll taxes strong throughout the year. The expiration of the temporary cut in payroll taxes and the increase in tax rates on income above certain thresholds enacted in the American Taxpayer Relief Act added to collections. Corporation income tax collections were another contributor to the increase in FY 2013. Additionally, collections increased for all other major sources of receipts except for Federal Reserve deposits of earnings.

Outlays for FY 2013 were $3,454 billion, $84 billion below those in FY 2012, a 2 percent decrease. As a percentage of GDP, outlays were 20.8 percent, 1.2 percentage points down from last year’s 22.0 percent. The reduction in outlays can be attributed to lower defense spending from the troop drawdown in Afghanistan, lower spending on unemployment compensation due to lower unemployment rates, higher dividend income from Fannie Mae and Freddie Mac, and spending cuts from sequestration across numerous agencies. These decreases were partially offset by increases in spending by the Departments of Agriculture and Health and Human Services (Medicare and Medicaid), and the Social Security Administration. Total Federal borrowing from the public increased by $702 billion during FY 2013 to $11,982 billion, or 72.1 percent of GDP. The increase in borrowing included $680 billion in borrowing to finance the deficit, and $22 billion in borrowing related to other transactions that affected the Government’s financing requirements, such as disbursements for direct student loans and other Federal credit programs. Total borrowing from the public net of financial assets and liabilities increased by $680 billion during FY 2013 to $11,070 billion, or 66.6 percent of GDP. (This measure of net borrowing, as reported in the Monthly Treasury Statement, excludes the Federal Government’s holdings of Fannie Mae and Freddie Mac preferred stock. If those stock holdings were included, net borrowing as a percentage of GDP would be reduced by roughly one percentage point.) Below are explanations of the differences between estimates in the MSR and the year-end actual amounts for receipts and agency outlays. Fiscal Year 2013 Receipts Total receipts for FY 2013 were $2,774.0 billion, $2.6 billion lower than the MSR estimate of $2,776.6 billion. This net decrease in receipts was attributable to higher-than-estimated collections of individual income taxes and estate and gift taxes, which were more than offset by lower-than-estimated collections of other sources of receipts. Table 2 displays actual receipts and estimates from the Budget and the MSR by source.

Individual income taxes were $1,316.4 billion, $6.7 billion higher than the MSR estimate. Withheld and nonwithheld payments of individual income tax liability were $3.8 billion and $4.2 billion higher than the MSR estimate, respectively. These increases were partially offset by higher-than-expected refunds of $1.3 billion. Corporation income taxes were $273.5 billion, $5.2 billion lower than the MSR estimate. This difference reflected lower-than-expected payments of 2013 corporation income tax liability of $5.1 billion. Social insurance and retirement receipts were $947.8 billion, $3.5 billion lower than the MSR estimate. This reduction was primarily attributable to lower-than-estimated deposits by States to the unemployment insurance trust fund of $1.7 billion. Reductions in other sources of social insurance and retirement receipts—primarily Social Security and Medicare payroll taxes— accounted for the remaining reduction in this source of receipts relative to the MSR estimate. Excise taxes were $84.0 billion, $1.3 billion below the MSR estimate. Estate and gift taxes were $18.9 billion, $1.2 billion greater than the MSR estimate. Customs duties were $31.8 billion, $0.3 billion below the MSR estimate. Miscellaneous receipts were $101.5 billion, $0.2 billion below the MSR estimate. Lower-thanexpected deposits of earnings by the Federal Reserve System of $2.2 billion were offset by higherthan-anticipated collections of other miscellaneous receipts.

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Fiscal Year 2013 Outlays Total outlays were $3,454.3 billion for FY 2013, $81.6 billion below the MSR estimate. Table 3 displays actual outlays by agency and major program as well as estimates from the Budget and the MSR. The largest changes in outlays from the MSR were in the following areas:

Department of Agriculture — Outlays for the Department of Agriculture were $155.9 billion, $3.7 billion lower than the MSR estimate. o Supplemental Nutrition Assistance Program (SNAP) outlays were $1.6 billion lower than estimated in the MSR as a result of slightly lower September participation than expected, lower-than-expected per person benefits, and lower-than-expected needs for disaster assistance. Similarly, outlays in the Child Nutrition National School Lunch Program were $1.2 billion lower than estimated due to lower meal service participation, particularly in the "Paid" or full-price meal category. o Outlays for the Pigford discriminations claims settlement were $1.1 billion greater than anticipated, because the MSR anticipated claims would be paid in October 2013 (FY 2014), but the claims were paid in September 2013 (FY 2013). o Net outlays for the Risk Management Agency's Federal Crop Insurance Fund were $0.8 billion lower than the MSR estimate. The 2008 Farm Bill changed the due date for farmers’ premium

payments from October to September, effective as of September 2013. The MSR overestimated the number of farmers who would pay late on the first year of the change, causing offsetting collections to be understated. o Net outlays for the Rural Utilities Service were $0.8 billion higher than the MSR estimate. The difference was due almost entirely to changes in the cushion of credit and the difficulty in predicting the rates at which borrowers elect to repay their loans using cushion of credit funds. o Outlays for the Commodity Credit Corporation were $0.3 billion less than anticipated, because commodity prices were slightly higher than anticipated. Higher commodity prices also reduced outlays for Funds for Strengthening Markets, Income, and Supply (section 32) by $0.2 billion by reducing the need for Government purchases.

Department of Defense — Outlays for the Department of Defense were $607.8 billion, $2.5 billion lower than the MSR estimate. Most of this difference was due to lower-than-expected outlays in operation and maintenance accounts over the second half of the fiscal year, as actions the Department took to accommodate sequestration reductions generated outlay savings more quickly than projected. These lower-than-expected outlays were partially offset by higher-thanexpected outlays for procurement and for research, development, test, and evaluation programs. Department of Education — Outlays for the Department of Education were $40.9 billion, $3.5 billion lower than the MSR estimate. The difference was primarily driven by the collection of $2.3 billion more in negative subsidies in the Federal Direct Student Loan Program than estimated in the MSR, the result of changes to student loan interest rates enacted in the Bipartisan Student Loan Certainty Act of 2013, which the President signed into law on August 9. Inaction on the Administration’s proposal to provide funding for teacher jobs reduced outlays by a further $0.4 billion relative to the MSR. Department of Health and Human Services — Outlays for the Department of Health and Human Services were $886.3 billion, $17.7 billion lower than the MSR estimate. Outlays for Medicaid were $8.7 billion lower than the MSR estimate, accounting for about half the difference in the agency as a whole. The difference was primarily the result of lower-than-anticipated benefits spending during the second half of the year. Additionally, refunds to the Medicare program were $5.7 billion (55.4 percent) higher than the MSR estimate, contributing to lower net outlays. This was partially offset by lower Medicare Part B premium receipts of $1.0 billion (1.6 percent), which increased net outlays relative to the MSR estimate. Department of Labor — Outlays for the Department of Labor were $80.3 billion, $5.9 billion lower than the MSR estimate. The largest single factor in the reduction in outlays relative to the MSR was Unemployment Insurance (UI) benefits. Most of the difference was due to lower spending in the regular UI and Emergency Unemployment Compensation programs as the number of weeks claimed declined below forecasted levels. In addition, the MSR estimate reflected outlays for several legislative proposals that were not enacted, including $0.8 billion in outlays for two of the Administration's jobs proposals (the Pathways Back to Work Fund and Reemployment NOW) and $0.6 billion for a proposal to strengthen UI solvency. Lastly, the MSR overestimated net outlays for the Federal Employees' Compensation Act program by $0.5 billion. Department of State — Outlays for the Department of State were $25.9 billion, $3.6 billion lower than the MSR estimate. Outlays were lower than expected for Department of State foreign assistance programs including International Narcotics Control and Law Enforcement, Migration and Refugee Assistance, and Global Health Programs. Outlays for these accounts were $2.0

billion in total below the MSR estimate. The late enactment of appropriations and delays in the allocation and execution process for foreign assistance funding, including Congressional notification requirements, contributed to slower-than-expected outlays for these programs. Lowerthan-expected outlays for capital intensive programs such as new overseas facility construction and delayed payments for contributions to international organizations and peacekeeping were primarily responsible for the remaining outlay difference of $1.6 billion.  Department of Transportation — Outlays for the Department of Transportation were $76.3 billion, $2.2 billion lower than the MSR estimate. The lower actual 2013 outlays were due to several factors. Obligations and outlays for the Federal Transit Administration were lower than anticipated in the MSR, as grantees adjusted to revised regulations and other guidance promulgated following enactment of a new surface transportation authorization bill, Moving Ahead for Progress in the 21st Century (MAP-21) in July 2012, just three months before the start of fiscal year 2013. The delayed enactment of 2013 appropriations also slowed outlay rates for transit capital programs relative to MSR estimates as some grantees were cautious with capital spending under a continuing resolution. Within the Federal Aviation Administration, Airport Improvement Program grants were obligated (and outlayed) more slowly than anticipated due to the later enactment of the 2013 full-year appropriation. Department of the Treasury — Outlays for the Department of the Treasury were $399.1 billion, $4.9 billion lower than the MSR estimate. o Net outlays for intragovernmental interest transactions with credit financing accounts were $7.5 billion higher than projected, including $3.6 billion lower-than-projected interest paid to credit financing accounts and $11.1 billion lower-than-anticipated receipts of interest from credit financing accounts. (Interest received from credit financing accounts is reported in Treasury's aggregate offsetting receipts.) o Outlays for the Troubled Asset Relief Program (TARP) were $2.5 billion below the MSR estimate, due almost entirely to lower outlays under TARP housing programs, including TARP support for FHA programs. o Outlays for Treasury's Grants in Lieu of Tax Credits for Specified Energy Property program were $1.0 billion less than expected. This program makes payments when renewable energy facilities are certified as being operational (i.e., placed in service and producing energy). The timing of placed in service dates is highly uncertain and actual completion of these investment projects was slower than assumed in the MSR.  Office of Personnel Management — Outlays for the Office of Personnel Management were $83.9 billion, $5.6 billion lower than the MSR estimate. This difference was primarily attributable to Congressional inaction on the legislative proposal to reform the United States Postal Service (USPS). $2.6 billion of the $5.6 billion difference was due to the reform’s proposed payment f rom the Civil Service Retirement and Disability Fund to refund excess Federal Employees Retirement System contributions to USPS. The proposal also contained a provision requiring the Postal Service Retiree Health Benefit Fund to outlay the government share of annuitant health insurance premiums to former postal employees. These outlays would have totaled $2.9 billion. Federal Deposit Insurance Corporation — Outlays for the Federal Deposit Insurance Corporation were $1.1 billion, $8.0 billion lower than the MSR estimate. The difference was primarily attributable to lower-than-expected payments related to FDIC's resolution of failed insured depository institutions through its Deposit Insurance Fund, which was partially a result of improved capital positions in the banking sector.

Undistributed Offsetting Receipts — Undistributed offsetting receipts were $249.5 billion, $2.1 billion higher than the MSR estimate. Receipts for employer share, employee retirement were $81.3 billion, $4.3 billion higher than MSR estimates. This difference was largely due to Congressional inaction on the MSR proposal for Postal reform, which provided for a $3.3 billion receipt in FY 2013 into the employer share accounts. Allowances — The MSR included $14.3 billion in outlays for allowances, virtually all of which represented the effects of the Administration’s proposal to reverse the 2013 sequestration imposed due to the failure of the Joint Select Committee on Deficit Reduction. Inaction on the proposal to reverse sequestration reduced outlays by $14.0 billion relative to the MSR estimates. ###

[1] Estimates of GDP reflect the revisions to historical data released by the Bureau of Economic Analysis (BEA) in July 2013. GDP for FY 2013 is based on the economic forecast for the 2014 Mid-Session Review, adjusted for the BEA revisions.

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