How Big Is the Federal Government And
Would the Administration's Budget Make it Bigger?

Overall Spending, Defense Spending and Major Parts of Domestic Spending
at Lowest Levels in Decades as a Share of the Economy
by Robert Greenstein and Sam Elkin

In releasing its budget, the Administration has sought to focus attention on the battery of initiatives in the budget, most of which either are in the discretionary (i.e., non-entitlement) side of the budget or take the form of tax credits. Many Administration critics call attention to the same array of initiatives and contend the budget represents a return to "big government." For example, Senate Budget Committee chairman Pete Domenici stated on February 1 that "Big government has been reborn and reinvented in this budget." Senator Rod Grams called the budget "a blueprint for the biggest expansion of the federal government in our history."

An examination of the budget and of federal spending trends tells a different story. Government spending as a share of the economy is now at its lowest level in recent decades and would continue to decline under the Clinton budget.

• In 1998, federal expenditures equaled 19.7 percent of the Gross Domestic Product (GDP), the basic measure of the size of the economy. This was a smaller share of GDP than federal spending has constituted at any other time in the past quarter century. Under the Administration's budget, federal spending would decline to 18.5 percent of GDP by 2004, which would be its lowest level since 1966.

• Non-defense discretionary spending now equals 3.4 percent of GDP, tied for the lowest level in any year since 1962. Under the Clinton budget, non-defense discretionary spending would keep pace with inflation, but would fall relative to the size of the economy, edging down to 3.1 percent of GDP by 2004.
  
  The Clinton budget contains $213 billion for defense and non-defense discretionary programs above what would be provided under the current policy "baseline," which limits expenditures for discretionary (or non-entitlement) programs to the levels set by the spending "caps" the 1997 budget agreement established. (Most of these additional funds would be made available from the budget surplus after a Social Security agreement is reached.) Yet even with the addition of this $213 billion, the bulk of which would be contingent upon a Social Security agreement, overall spending for discretionary programs in 2004 would be only at about its 1999 level, adjusted for inflation. Non-defense discretionary spending would be a tiny bit lower in inflation-adjusted terms in 2004 than in 1999, while defense spending would be modestly above the 1999 level. Essentially, the $213 billion in additional resources for discretionary programs would prevent these programs from being reduced substantially in coming years, as otherwise would occur under the 1997 budget agreement.

• Over recent decades, Medicare and Medicaid spending has grown relative to the size of the economy, reflecting rapid increases in health care costs resulting in part from improvements in medical technology that improve health and prolong life but are costly. Overall expenditures for entitlement programs other than Medicare and Medicaid, however, are lower now as a share of GDP than in many previous years. They would remain steady under the Clinton budget.
  
  Under both current law and the Clinton budget, expenditures for entitlements and other mandatory programs, other than Medicare and Medicaid, will remain at 7.4 percent of the economy between 1999 and 2004, a level at or below that in all but two years since 1972.

Many of those who raise the specter of big government also argue that federal taxes are at an exceptionally high level. For most families, this is not correct.

• Federal revenue collections have increased in recent years as a share of GDP. In large part, the increased revenue reflects the larger amounts of taxes collected from individuals at higher income levels, who have secured most of the income gains from the rapid rise in the stock market. The substantial jump in their incomes has meant they have paid more in taxes.
  
  The percentage of income that typical middle-income families pay in federal taxes, however, has not risen. In fact, the share of income such families pay in federal taxes is now modestly lower, not higher, than in most years of the past several decades. Congressional Budget Office data show that a median income family (i.e., a family in the middle of the income spectrum) now pays a smaller percentage of its income in federal taxes than in most years since 1977. Treasury Department data on federal personal income taxes indicate that a middle-income family with two children will pay a smaller percentage of its income in federal personal income tax this year than in any year since 1966.

• Under current law, as well as under the Administration's budget, the overall level of federal taxes as a share of the economy will decline modestly between now and 2004. The Administration's budget contains some modest revenue-raising measures, the largest of which is a proposed increase in excise taxes on cigarettes and other tobacco products. Even with these revenue-raising measures, taxes would decline somewhat as a share of GDP between 1999 and 2004 (because the tax cuts enacted in 1997 continue to phase in and the current surge of capital gains income — and capital gains tax collections — is expected to subside).

The principal fiscal policy issue this year is not whether big government is returning. Nor is it the fate of the various, mostly modest Clinton initiatives. To the contrary, the principal fiscal issue is the overarching question of what use to make of the emerging budget surpluses.

The dominant feature of the Administration's budget is not the initiatives it contains, but its restraint with regard to the surpluses. The budget proposes to use the lion's share of the surpluses to pay down the national debt and increase national saving for the benefit of future generations, rather than to consume substantial amounts of the surpluses through either large tax cuts or large program expansions.

The Analysis and the Clinton Proposals Regarding the Surplus This analysis of federal expenditures under the proposed Clinton budget does not count the proposed transfer of part of the unified budget surplus to the Social Security and Medicaid trust funds as an expenditure. These transfers do not represent expenditures in the normal sense — the funds would be transferred within the government and would be saved (and used primarily to pay down the national debt), rather than expended. The analysis also does not include the Administration proposal to use 12 percent of unified budget surpluses for universal savings accounts. The Administration has not finished designing this proposal, and the budget contains no details on it. Administration officials said last week that federal support for these accounts would be provided through a refundable tax credit. This suggests the majority of federal resources devoted to these accounts would take the form of a tax reduction rather than an expenditure. The refundable portion of the tax credit, on the other hand, would constitute an expenditure. Given the percentage of the projected surplus that the Administration proposes be used for these accounts, the accounts would likely increase federal expenditures by one tenth of one percent of GDP beyond the levels reflected in this analysis.

 

Levels of Federal Expenditures

Probably the most widespread measure of the size of the federal government is the percentage that federal expenditures constitute of the Gross Domestic Product. The Gross Domestic Product, or GDP, is the basic measure of the size of the U.S. economy.

• In 1998, this measure stood at its lowest level since 1974, as federal expenditures constituted 19.7 percent of GDP.⁽¹⁾ (See Table 2.) In the 1980s, federal expenditures averaged 22.4 percent. (They stood at 21.4 percent of GDP in 1989, a year comparable to 1998 in the economic cycle.)
  
  Federal expenditures are expected to fall farther as a share of GDP between now and 2004. CBO projects that under current policy, federal expenditures will drop to 18.0 percent of GDP in 2004. OMB projects that under the Clinton budget, expenditures would drop to 18.5 percent of GDP in 2004. In both cases, this would be the lowest level since 1966.

• Total federal expenditures include interest payments on the debt. The amounts needed to make these interest payments reflect the size of the accumulated deficits the government has run in the past. These amounts tell little about the current size or reach of the federal government, since interest payments neither fund any programs nor pay for any government workers. To gain a sense of the size and reach of the current operations and programs of the federal government, one should analyze federal expenditures exclusive of interest payments on the debt.
  
  When this is done, the results show that spending on government programs in fiscal year 1999 — that is, total federal expenditures exclusive of interest payments — will equal 16.9 percent of GDP under CBO estimates and 17.1 percent under the OMB estimates. CBO projects that under current policy, spending on government programs would decline to 16.4 percent of the GDP by 2004, which would be the lowest level since 1965. Under the President's budget, program spending would equal 16.8 percent of GDP in 2004, the lowest level since 1966 (except for 1998, when it also stood at 16.8 percent of GDP; see Table 2.).

 

Discretionary Program Expenditures

Non-defense discretionary programs — non-defense programs other than entitlements — encompass a wide range of government responsibilities, including education, health research, veterans' hospitals, law enforcement, and the federal government's administrative operations. Numerous grants to state and local governments are included in this part of the budget.

Measured as a share of the economy, federal expenditures for non-defense discretionary functions and programs are low compared with the levels of recent decades. Non-defense discretionary spending stood at 3.4 percent of GDP in fiscal year 1998. There is no year since 1962 when non-defense discretionary expenditures were below this level. Defense spending, at 3.2 percent of GDP, is at its lowest level since at least the late 1940s, having declined substantially from Cold War levels. (See Table 3.)

The Clinton budget proposes $213 billion more in expenditures for discretionary programs over the next five years than would be provided under the current policy "baseline," which reflects the discretionary spending caps established by the 1997 budget agreement. About two-thirds of this $213 billion would be financed by using 11 percent of the projected budget surpluses for discretionary programs; the Administration's budget calls for making these funds available for discretionary programs after an agreement is reached on Social Security reform. The remaining one-third of the $213 billion in discretionary expenditures would be financed by the proposed increase in cigarette taxes, as well as by various reductions in entitlement and other mandatory programs and some smaller revenue-raising measures.

Even with the addition of this $213 billion, overall discretionary spending in 2004 would remain at about its 1999 level, adjusted for inflation. Non-defense discretionary spending in 2004 would be marginally below its inflation-adjusted 1999 level. Defense spending would be about two percent above its inflation-adjusted 1999 level.

When measured as a share of GDP, discretionary spending would continue declining. (Since the economy is projected to grow faster than inflation, expenditures that grow at the rate of inflation decline modestly as a percentage of the economy.) OMB projects that under the Clinton budget, non-defense discretionary spending would edge down from 3.5 percent of GDP in 1999 to 3.1 percent in 2004. Expenditures for these programs would be at their lowest share of GDP since 1961, even with the Administration's initiatives. Defense spending also would continue to trend down as a share of GDP, reaching 2.9 percent of GDP in 2004. (The Administration's budget includes an increase in military pensions that has small costs over the next five years but larger costs in subsequent years.)

 

Is the Decline in Spending as a Share of GDP Limited to the Defense Budget?

While agreeing that the size of the federal government has fallen as a share of the economy, some commentators ascribe this reduction solely to a decline in defense spending. They contend that the decline in defense spending is the only factor that has contributed significantly to the contraction of the federal government as a share of GDP, and hence the only factor other than revenue increases that has contributed meaningfully to balancing the budget and generating a surplus.

This belief, however, is not correct. Spending as a share of GDP has fallen for other parts of the budget as well.

Those contending that virtually all of the reduction in expenditures has occurred in the defense budget sometimes note that total federal non-defense spending, at more than 16 percent of GDP, is above the levels of the 1970s and the late 1980s. Such statements miss several points.

• The contention that expenditures for non-defense programs have not declined as a share of GDP rests on expenditure data that lump interest payments on the debt in with spending for non-defense programs. As discussed above, interest payments cannot properly be combined with expenditures for non-defense programs when undertaking such an analysis.

• The large deficits the nation rang up in the 1980s caused interest payments to rise sharply as a share of GDP. Deficits stem from an imbalance between revenues and spending, and the factors that produced the large deficits of the 1980s included the 1981 tax cut and the defense build-up of that period. Counting the increase in interest payments these deficits generated simply as an increase in domestic spending — and using this rise in interest payments to make it appear as though the domestic side of the federal government has been growing — produces a misleading result. It masks the decline that has occurred in expenditures for a number of areas of the non-defense budget as a share of GDP.

• OMB projects that federal expenditures for non-defense programs — total federal expenditures exclusive of defense spending and interest payments on the debt — will total 14.0 percent of GDP in 1999. This is lower than the percentage for all but one year from 1975 through 1983 as well as several years of the early 1990s. It is above the percentage for the late 1980s, as well as 1997 and 1998. (See Table 4.)

• Moreover, even these figures cloud part of the picture. Medicare and Medicaid expenditures have risen substantially. When federal program spending is divided into Medicare/Medicaid and everything else, spending on non-defense programs other than Medicare and Medicaid is seen to have dropped in recent years as a share of GDP.
  
  OMB estimates that total federal expenditures for non-defense programs other than Medicare and Medicaid now equal 10.4 percent of GDP. This is a lower share of GDP than in 23 of the past 27 years. In several years in the 1970s and early 1980s, federal expenditures for non-defense programs other than Medicare or Medicaid approached or exceeded 13 percent of GDP, well above the current level. These data demonstrate that defense is not the only part of the federal government that has shrunk significantly as a share of the economy. (See Table 4.)

• OMB projects that spending for non-defense programs other than Medicare and Medicaid will edge down further, to 10.1 percent of GDP in 2004, under the Clinton budget. There is no year since 1971 except 1997 when this part of the budget has consumed a smaller percentage of GDP.

Entitlement Spending

Even among entitlements other than Medicare and Medicaid, the story is one of some shrinkage in spending as a share of GDP. Federal expenditures for entitlements and other mandatory spending, other than Medicare and Medicaid, are projected to equal 7.4 percent of GDP in 1999. This is at or below the share of GDP that federal expenditures for these programs constituted in every year since 1972 except two. OMB estimates that under the Clinton budget, expenditures for these programs would hold constant at 7.4 percent of GDP through 2004. (See Table 4.)

That Medicare and Medicaid have been rising as a share of GDP should come as no surprise. In recent decades, health care costs in both the public and private sectors have risen faster than the economy, particularly as advances in medical technology have prolonged life but often at significant cost. In addition, employers have been insuring a smaller share of employees since at least 1987, the first year for which Census data on this matter are available, leading more low-wage workers and their families to turn to Medicaid for coverage and helping lead policymakers to extend Medicaid to more children in low-income working families. Demographic factors as well have pushed up Medicare costs; in 1997, some 11.9 percent of the population was elderly, up from 9.6 percent in 1970.

 

Federal Taxes vs. Federal Spending

Some Members of Congress and commentators cite a CBO estimate that federal taxes now equal 20.7 percent of GDP and observe this is the highest level since the end of World War II. Such statements should not lead, however, to a conclusion that the federal government is bigger than ever. Total federal expenditures equaled or exceeded 20.7 percent of GDP every year but one from 1975 through 1996. Federal taxes were below this share. The imbalance caused the large deficits we experienced.

The recent increase in federal revenue collections as a share of GDP has helped eliminate the deficit and produce a surplus. Even so, the decline in federal spending has been a slightly larger factor over the past decade in erasing the deficit and producing a surplus. Federal spending as a percentage of GDP is currently 2.6 percentage points lower than its average level in the 1980s. Federal tax receipts as a percentage of GDP are 2.3 percentage points above the 1980s average. (See Table 1.)

It also bears noting that the share of GDP consisting of federal taxes is projected to edge down over the next few years. This decline reflects in part the effects of the 1997 tax legislation. A number of the tax cuts in that legislation either phase in gradually over several years or do not take effect right away. As a result, taxpayers will experience new tax cuts each year for several years.

Table 1

CONTRIBUTIONS TO DEFICIT REDUCTION Spending and Taxes as a Share of GDP
	1980s Average	1999	Percentage Point Change
Federal Expenditure	22.4%	19.7%	-2.6 percentage points
Federal Tax Receipts	18.4%	20.6%	+2.3 percentage points
Source: Budget of the United States Government, Fiscal Year 2000

In addition, as CBO director June O'Neill testified last year, "current levels of tax revenues are elevated in large part because capital gains income is unusually high due to the stunning rise in the stock market and to such factors as the recovery of the commercial real estate market...."⁽²⁾ In testimony in early 1999, O'Neill also explained that various factors, including the phasing in of the 1997 tax legislation and an eventual drop in tax receipts from capital gains, "will push revenues down as a share of the economy in the years ahead."⁽³⁾ CBO projects that under current law, revenues will decline from 20.7 percent of GDP in 1999 to 20.2 percent of GDP in 2003 and succeeding years.

OMB projects that under the Clinton budget as well, revenues will decline, edging down to 20.0 percent of GDP in 2004 despite the budget's cigarette tax increase and some smaller revenue-raising measures. The budget's proposed revenue-raising measures would have little effect on revenues as a share of GDP; part of the revenue-raising measures are offset by proposed tax cuts, primarily in the form of new or expanded tax credits, and the remaining revenue-raising proposals are small. The net change in taxes as a result of the Administration proposals would raise revenues by one-tenth of one percent of GDP, largely as a result of the proposed cigarette tax hike. (Note: OMB and CBO differ slightly in their estimates of revenues collections and GDP under current law.)

The revenue-raising measures consist primarily of provisions to close or narrow tax shelters and corporate tax breaks the Administration contends are unnecessary or inefficient, a 55-cent per pack increase on cigarettes, and the reinstatement of expired taxes on corporations to support Superfund environmental clean-up activities. These proposals would have little effect on the tax burdens of middle-class individuals who do not smoke. Some families qualifying for new or expanded tax credits would experience a tax reduction.

Middle-Class Tax Burdens Not at High Point

Finally, the fact that revenues are at a high point for recent decades when measured as a percentage of GDP does not mean that the typical family's tax burden, measured as a share of its income, is also at a high point. As June O'Neill explained last year, tax receipts have risen as a share of GDP in the last few years "mainly because realizations of capital gains were unusually high and because a larger share of income was earned by people at the top of the income ladder, who are taxed at higher rates."⁽⁴⁾ Such developments do not materially affect the percentage of income paid in federal taxes by the typical family.

According to CBO, the federal taxes that a median-income family pays in 1999 will constitute a lower percentage of income than the taxes the median family paid in 1977 and most years since then. CBO estimates that a median-income family — a family exactly in the middle of the income distribution with income of approximately $39,000 — will pay 18.9 percent of its income in federal taxes in 1999. (The CBO analysis includes the effect of income taxes, Social Security and other social insurance taxes, excise taxes, and corporate income taxes.) By comparison, a median-income family paid 19.5 percent of income in federal taxes 1977 and 19.2 percent of income in 1985. In the years since 1977 for which CBO data are available, the federal tax burdens imposed on median income families were lower only in 1983.⁽⁵⁾

Analyses from the Treasury Department tell a similar story. According to Treasury, a middle-income family of four with two children will pay a smaller percentage of income in federal personal income tax in 1999 than in any year since 1966. Somewhat higher income families with children also have an historically low burden. The Treasury analysis shows that families of four with double the median income, or income of nearly $110,000 in 1999, will have a lower federal income tax burden this year than families with twice the median income bore every previous year since 1972.⁽⁶⁾

Surging capital gains and executive bonuses may be enlarging federal receipts, but these analyses demonstrate that the tax burdens of middle- and even upper-middle class families are at or near lows for recent decades, not at peak levels.

Table 2

Total Federal Spending and Federal Program Spending as a Share of GDP, FY 1960 to 2004
	CBO Projections				OMB Projections
Year	Total Federal Expenditures	Net Interest Payments	Program Expenditures (Expenditures other than Interest Payments)		Total Federal Expenditures	Net Interest Payments	Program Expenditures (Expenditures other than Interest Payments)
1960	17.8%	1.3%	16.5%		17.8%	1.3%	16.5%
1961	18.4%	1.3%	17.1%		18.4%	1.3%	17.1%
1962	18.8%	1.2%	17.6%		18.8%	1.2%	17.6%
1963	18.6%	1.3%	17.3%		18.6%	1.3%	17.3%
1964	18.5%	1.3%	17.2%		18.5%	1.3%	17.2%
1965	17.2%	1.3%	16.0%		17.2%	1.3%	16.0%
1966	17.9%	1.2%	16.6%		17.9%	1.2%	16.6%
1967	19.4%	1.3%	18.1%		19.4%	1.3%	18.1%
1968	20.5%	1.3%	19.2%		20.5%	1.3%	19.2%
1969	19.4%	1.3%	18.0%		19.4%	1.3%	18.0%
1970	19.4%	1.4%	18.0%		19.4%	1.4%	18.0%
1971	19.5%	1.4%	18.1%		19.5%	1.4%	18.1%
1972	19.6%	1.3%	18.3%		19.6%	1.3%	18.3%
1973	18.8%	1.3%	17.5%		18.8%	1.3%	17.5%
1974	18.7%	1.5%	17.2%		18.7%	1.5%	17.2%
1975	21.4%	1.5%	19.9%		21.4%	1.5%	19.9%
1976	21.5%	1.5%	19.9%		21.5%	1.5%	19.9%
1977	20.8%	1.5%	19.2%		20.8%	1.5%	19.2%
1978	20.7%	1.6%	19.1%		20.7%	1.6%	19.1%
1979	20.2%	1.7%	18.5%		20.2%	1.7%	18.5%
1980	21.7%	1.9%	19.8%		21.7%	1.9%	19.8%
1981	22.2%	2.3%	20.0%		22.2%	2.3%	20.0%
1982	23.2%	2.6%	20.6%		23.2%	2.6%	20.6%
1983	23.6%	2.6%	21.0%		23.6%	2.6%	21.0%
1984	22.3%	2.9%	19.4%		22.3%	2.9%	19.4%
1985	23.1%	3.2%	19.9%		23.1%	3.2%	19.9%
1986	22.6%	3.1%	19.5%		22.6%	3.1%	19.5%
1987	21.8%	3.0%	18.8%		21.8%	3.0%	18.8%
1988	21.5%	3.1%	18.4%		21.5%	3.1%	18.4%
1989	21.4%	3.2%	18.2%		21.4%	3.2%	18.2%
1990	22.0%	3.2%	18.8%		22.0%	3.2%	18.8%
1991	22.6%	3.3%	19.3%		22.6%	3.3%	19.3%
1992	22.5%	3.2%	19.2%		22.5%	3.2%	19.2%
1993	21.8%	3.1%	18.7%		21.8%	3.1%	18.7%
1994	21.4%	3.0%	18.4%		21.4%	3.0%	18.4%
1995	21.1%	3.2%	17.8%		21.1%	3.2%	17.8%
1996	20.7%	3.2%	17.5%		20.7%	3.2%	17.5%
1997	20.0%	3.1%	17.0%		20.0%	3.1%	17.0%
1998	19.7%	2.9%	16.8%		19.7%	2.9%	16.8%
	Projections under Current Policy				Projections under Clinton Budget
1999	19.5%	2.6%	16.9%		19.7%	2.6%	17.1%
2000	19.1%	2.4%	16.7%		19.4%	2.4%	17.0%
2001	18.8%	2.2%	16.6%		19.3%	2.2%	17.1%
2002	18.2%	2.0%	16.3%		18.8%	2.0%	16.8%
2003	18.2%	1.8%	16.4%		18.7%	1.8%	16.9%
2004	18.0%	1.6%	16.4%		18.5%	1.7%	16.8%
Sources:  Budget of the United States Government, Fiscal Year 2000 CBO, The Economic and Budget Outlook: Fiscal Years 2000-2009

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Table 3

Non-Defense and Defense Discretionary Spending as a Share of GDP, FY 1962 to 2004
	CBO Projections				OMB Projections
Year	Non-Defense Discretionary	Defense	Total Discretionary		Non-Defense Discretionary	Defense	Total Discretionary
1962	3.4%	9.3%	12.7%		3.4%	9.3%	12.7%
1963	3.6%	9.0%	12.6%		3.6%	9.0%	12.6%
1964	3.8%	8.6%	12.4%		3.8%	8.6%	12.4%
1965	3.9%	7.4%	11.3%		3.9%	7.4%	11.3%
1966	4.1%	7.8%	12.0%		4.1%	7.8%	12.0%
1967	4.2%	8.9%	13.1%		4.2%	8.9%	13.1%
1968	4.1%	9.5%	13.6%		4.1%	9.5%	13.6%
1969	3.7%	8.7%	12.4%		3.7%	8.7%	12.4%
1970	3.8%	8.1%	11.9%		3.8%	8.1%	11.9%
1971	4.0%	7.3%	11.4%		4.0%	7.3%	11.4%
1972	4.2%	6.7%	10.9%		4.2%	6.7%	10.9%
1973	4.1%	5.9%	10.0%		4.1%	5.9%	10.0%
1974	4.0%	5.6%	9.6%		4.0%	5.6%	9.6%
1975	4.5%	5.6%	10.2%		4.5%	5.6%	10.2%
1976	4.9%	5.2%	10.1%		4.9%	5.2%	10.1%
1977	5.0%	4.9%	10.0%		5.0%	4.9%	10.0%
1978	5.1%	4.7%	9.9%		5.1%	4.7%	9.9%
1979	4.9%	4.7%	9.6%		4.9%	4.7%	9.6%
1980	5.2%	5.0%	10.2%		5.2%	5.0%	10.2%
1981	4.9%	5.2%	10.1%		4.9%	5.2%	10.1%
1982	4.4%	5.8%	10.1%		4.4%	5.8%	10.1%
1983	4.2%	6.1%	10.3%		4.2%	6.1%	10.3%
1984	4.0%	6.0%	9.9%		4.0%	6.0%	9.9%
1985	4.0%	6.2%	10.1%		4.0%	6.2%	10.1%
1986	3.8%	6.3%	10.0%		3.8%	6.3%	10.0%
1987	3.5%	6.1%	9.6%		3.5%	6.1%	9.6%
1988	3.5%	5.9%	9.4%		3.5%	5.9%	9.4%
1989	3.4%	5.7%	9.1%		3.4%	5.7%	9.1%
1990	3.5%	5.3%	8.8%		3.5%	5.3%	8.8%
1991	3.6%	5.5%	9.1%		3.6%	5.5%	9.1%
1992	3.8%	4.9%	8.7%		3.8%	4.9%	8.7%
1993	3.8%	4.5%	8.4%		3.8%	4.5%	8.4%
1994	3.8%	4.1%	7.9%		3.8%	4.1%	7.9%
1995	3.8%	3.8%	7.6%		3.8%	3.8%	7.6%
1996	3.6%	3.5%	7.1%		3.6%	3.5%	7.1%
1997	3.5%	3.4%	6.9%		3.5%	3.4%	6.9%
1998	3.4%	3.2%	6.6%		3.4%	3.2%	6.6%
	Projections under Current Policy				Projections under Clinton Budget
1999	3.4%	3.1%	6.6%		3.5%	3.2%	6.6%
2000	3.3%	3.0%	6.3%		3.5%	3.0%	6.5%
2001	3.2%	2.9%	6.0%		3.5%	3.0%	6.5%
2002	3.0%	2.7%	5.7%		3.3%	3.0%	6.3%
2003	2.9%	2.7%	5.6%		3.2%	2.9%	6.2%
2004	2.9%	2.6%	5.5%		3.1%	2.9%	6.0%
Earliest available data are for 1962. Assumes proportion of discretionary spending dedicated to defense stays constant after caps are lifted.
Sources: CBPP calculations based on data from the Budget of the United States Government, Fiscal Year 2000 and CBO's The Economic and Budget Outlook for Fiscal Years 2000-2009

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Table 4

Categories of Federal Expenditures as a Percentage of GDP, 1962 to 2004, using OMB Projections under the President's Budget Proposal
Year	Total Federal Program Expenditures (Expenditures other than Interest Payments)	Non-Defense Program Expenditures	Medicare and Medicaid	Non-Defense Program Expenditures, excluding Medicare and Medicaid	Entitlements and other Mandatory Programs, excluding Medicare and Medicaid1
1962	17.6%	8.3%	0.0%	8.3%	5.8%
1963	17.3%	8.3%	0.0%	8.3%	5.7%
1964	17.2%	8.6%	0.0%	8.6%	5.7%
1965	16.0%	8.5%	0.0%	8.5%	5.5%
1966	16.6%	8.8%	0.1%	8.7%	5.4%
1967	18.1%	9.3%	0.5%	8.8%	5.5%
1968	19.2%	9.8%	0.7%	9.1%	5.9%
1969	18.0%	9.3%	0.8%	8.5%	5.7%
1970	18.0%	9.8%	0.8%	9.0%	6.1%
1971	18.1%	10.8%	0.9%	9.9%	6.8%
1972	18.3%	11.5%	1.0%	10.6%	7.2%
1973	17.5%	11.6%	0.9%	10.6%	7.6%
1974	17.2%	11.6%	1.0%	10.6%	7.8%
1975	19.9%	14.2%	1.2%	13.0%	9.4%
1976	19.9%	14.7%	1.4%	13.4%	9.3%
1977	19.2%	14.3%	1.4%	12.9%	8.6%
1978	19.1%	14.4%	1.5%	12.9%	8.5%
1979	18.5%	13.8%	1.5%	12.3%	8.1%
1980	19.8%	14.9%	1.7%	13.2%	8.7%
1981	20.0%	14.8%	1.8%	13.0%	9.0%
1982	20.6%	14.8%	2.0%	12.8%	9.3%
1983	21.0%	14.9%	2.1%	12.8%	9.6%
1984	19.4%	13.5%	2.0%	11.5%	8.3%
1985	19.9%	13.7%	2.1%	11.6%	8.5%
1986	19.5%	13.3%	2.1%	11.1%	8.1%
1987	18.8%	12.7%	2.2%	10.5%	7.9%
1988	18.4%	12.6%	2.2%	10.4%	7.8%
1989	18.2%	12.5%	2.2%	10.3%	7.7%
1990	18.8%	13.5%	2.4%	11.1%	8.2%
1991	19.3%	13.8%	2.6%	11.2%	8.2%
1992	19.2%	14.3%	3.0%	11.3%	8.2%
1993	18.7%	14.2%	3.1%	11.0%	7.8%
1994	18.4%	14.3%	3.3%	11.0%	7.7%
1995	17.8%	14.0%	3.4%	10.6%	7.5%
1996	17.5%	14.0%	3.5%	10.5%	7.4%
1997	17.0%	13.6%	3.5%	10.0%	7.2%
1998	16.8%	13.6%	3.5%	10.1%	7.3%
1999	17.1%	14.0%	3.6%	10.4%	7.4%
2000	17.0%	14.0%	3.6%	10.4%	7.4%
2001	17.1%	14.1%	3.7%	10.4%	7.4%
2002	16.8%	13.9%	3.7%	10.2%	7.4%
2003	16.9%	13.9%	3.8%	10.2%	7.4%
2004	16.8%	13.9%	3.9%	10.1%	7.4%
1 Due to technical differences between the ways CBO and OMB present offsetting receipts, this column is largely but not entirely comparable to the corresponding column in Table 3.
Earliest available data are for 1962.
Sources: CBPP calculations based on data from the Budget of the United States Government, Fiscal Year 2000 The Economic and Budget Outlook

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Table 5

Categories of Federal Expenditures as a Percentage of GDP, 1962 to 2004, using CBO Projections under Current Policy
Year	Total Federal Program Expenditures (Expenditures other than Interest Payments)	Non-Defense Program Expenditures	Medicare and Medicaid	Non-Defense Program Expenditures, excluding Medicare and Medicaid	Entitlements and other Mandatory Programs, excluding Medicare and Medicaid
1962	17.6%	8.3%	0.0%	8.3%	6.1%
1963	17.3%	8.3%	0.0%	8.3%	6.0%
1964	17.2%	8.6%	0.0%	8.6%	6.0%
1965	16.0%	8.5%	0.0%	8.5%	5.7%
1966	16.6%	8.8%	0.1%	8.7%	5.7%
1967	18.1%	9.3%	0.5%	8.8%	5.7%
1968	19.2%	9.8%	0.7%	9.1%	6.1%
1969	18.0%	9.3%	0.8%	8.5%	5.9%
1970	18.0%	9.8%	0.8%	9.0%	6.3%
1971	18.1%	10.8%	0.9%	9.9%	7.1%
1972	18.3%	11.5%	1.0%	10.6%	7.5%
1973	17.5%	11.6%	0.9%	10.6%	7.8%
1974	17.2%	11.6%	1.0%	10.6%	8.0%
1975	19.9%	14.2%	1.2%	13.0%	9.6%
1976	19.9%	14.7%	1.4%	13.4%	9.5%
1977	19.2%	14.3%	1.4%	12.9%	8.8%
1978	19.1%	14.4%	1.5%	12.9%	8.7%
1979	18.5%	13.8%	1.5%	12.3%	8.3%
1980	19.8%	14.9%	1.7%	13.2%	9.0%
1981	20.0%	14.8%	1.8%	13.0%	9.2%
1982	20.6%	14.8%	2.0%	12.8%	9.5%
1983	21.0%	14.9%	2.1%	12.8%	9.8%
1984	19.4%	13.5%	2.0%	11.5%	8.5%
1985	19.9%	13.7%	2.1%	11.6%	8.7%
1986	19.5%	13.3%	2.1%	11.1%	8.3%
1987	18.8%	12.7%	2.2%	10.5%	8.0%
1988	18.4%	12.6%	2.2%	10.4%	7.9%
1989	18.2%	12.5%	2.2%	10.3%	7.9%
1990	18.8%	13.5%	2.4%	11.1%	8.4%
1991	19.3%	13.8%	2.6%	11.2%	9.1%
1992	19.2%	14.3%	3.0%	11.3%	8.5%
1993	18.7%	14.2%	3.1%	11.0%	8.0%
1994	18.4%	14.3%	3.3%	11.0%	7.9%
1995	17.8%	14.0%	3.4%	10.6%	7.7%
1996	17.5%	14.0%	3.5%	10.5%	7.6%
1997	17.0%	13.6%	3.5%	10.0%	7.4%
1998	16.8%	13.6%	3.5%	10.1%	7.5%
1999	16.9%	13.7%	3.5%	10.2%	7.5%
2000	16.7%	13.7%	3.6%	10.1%	7.5%
2001	16.6%	13.7%	3.7%	10.0%	7.5%
2002	16.3%	13.5%	3.7%	9.8%	7.5%
2003	16.4%	13.7%	3.8%	9.9%	7.5%
2004	16.4%	13.8%	4.0%	9.8%	7.5%
Earliest available data are for 1962.
Sources: CBPP calculations based on data from the Budget of the United States Government, Fiscal Year 2000 and CBO's The Economic and Budget Outlook

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End Notes:

1. The figures in this paper are primarily based on data from two sources — the Congressional Budget Office (especially CBO's new report, The Economic and Budget Outlook: Fiscal Years 2000-2009, January 1999), and the Budget of the United States Government, Fiscal Year 2000.

2. Statement of June E. O'Neill, Director, Congressional Budget Office, before the Senate Budget Committee, January 28, 1998.

3. Statement of June E. O'Neill, Director, Congressional Budget Office, before the Senate Budget Committee, January 29, 1999.

4. O'Neill, p. 6.

5. Estimates of Federal Tax Liabilities for Individuals and Families by Income Category and Family Type for 1995 and 1999. CBO Memorandum, May, 1998, and CBO reports for various other years.

6. Office of Tax Analysis, Department of the Treasury, October 20, 1998. In the Treasury analysis, family income is assumed to be at the median income for four-person families, which Treasury estimates to be approximately $55,000 in 1999, and the family is assumed to have two children.