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114th Congress    }                                     {       Report
                        HOUSE OF REPRESENTATIVES
 2d Session       }                                     {      114-470
_______________________________________________________________________

                                     


                         CONCURRENT RESOLUTION
                            ON THE BUDGET--
                            FISCAL YEAR 2017

                               ----------                              

                              R E P O R T

                                 of the

                        COMMITTEE ON THE BUDGET
                        HOUSE OF REPRESENTATIVES

                              to accompany

                            H. Con. Res. 125

  ESTABLISHING THE BUDGET FOR THE UNITED STATES GOVERNMENT FOR FISCAL 
  YEAR 2017 AND SETTING FORTH APPROPRIATE BUDGETARY LEVELS FOR FISCAL 
                        YEARS 2018 THROUGH 2026

                             together with

                             MINORITY VIEWS

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


 March 23, 2016.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed












114th Congress    }                                     {       Report
                        HOUSE OF REPRESENTATIVES
 2d Session       }                                     {      114-470
_______________________________________________________________________

                                     


                         CONCURRENT RESOLUTION

                            ON THE BUDGET--

                            FISCAL YEAR 2017

                               __________

                              R E P O R T

                                 of the

                        COMMITTEE ON THE BUDGET

                        HOUSE OF REPRESENTATIVES

                              to accompany

                            H. Con. Res. 125

  ESTABLISHING THE BUDGET FOR THE UNITED STATES GOVERNMENT FOR FISCAL 
  YEAR 2017 AND SETTING FORTH APPROPRIATE BUDGETARY LEVELS FOR FISCAL 
                        YEARS 2018 THROUGH 2026

                             together with

                             MINORITY VIEWS

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


 March 23, 2016.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed
                                    ______

                         U.S. GOVERNMENT PUBLISHING OFFICE 

99-437                         WASHINGTON : 2016              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
                        COMMITTEE ON THE BUDGET

                      TOM PRICE, Georgia, Chairman
TODD ROKITA, Indiana, Vice Chairman  CHRIS VAN HOLLEN, Maryland,
SCOTT GARRETT, New Jersey              Ranking Minority Member
MARIO DIAZ-BALART, Florida           JOHN A. YARMUTH, Kentucky
TOM COLE, Oklahoma                   BILL PASCRELL, Jr., New Jersey
TOM McCLINTOCK, California           TIM RYAN, Ohio
DIANE BLACK, Tennessee               GWEN MOORE, Wisconsin
ROB WOODALL, Georgia                 KATHY CASTOR, Florida
VICKY HARTZLER, Missouri             JIM McDERMOTT, Washington
MARLIN A. STUTZMAN, Indiana          BARBARA LEE, California
FRANK GUINTA, New Hampshire          MARK POCAN, Wisconsin
MARK SANFORD, South Carolina         MICHELLE LUJAN GRISHAM, New Mexico
STEVE WOMACK, Arkansas               DEBBIE DINGELL, Michigan
DAVE BRAT, Virginia                  TED LIEU, California
ROD BLUM, Iowa                       DONALD NORCROSS, New Jersey
ALEXANDER X. MOONEY, West Virginia   SETH MOULTON, Massachusetts
GLENN GROTHMAN, Wisconsin
GARY J. PALMER, Alabama
JOHN R. MOOLENAAR, Michigan
BRUCE WESTERMAN, Arkansas
JAMES B. RENACCI, Ohio
BILL JOHNSON, Ohio

                           Professional Staff

                     Richard E. May, Staff Director
                Thomas S. Kahn, Minority Staff Director
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                            C O N T E N T S

                                                                   Page
Introduction.....................................................     3
Summary Tables--Spending and Revenue:
    Table 1. Fiscal Year 2017 Budget Resolution Total Spending 
      and Revenue................................................    19
    Table 2. Fiscal Year 2017 Budget Resolution Discretionary 
      Spending...................................................    22
    Table 3. Fiscal Year 2017 Budget Resolution Mandatory 
      Spending...................................................    25
Comparison With the President's Budget...........................    29
    Table 4. Summary of Fiscal Year 2017 Budget Resolution.......    34
    Table 5. Fiscal Year 2017 House Budget Resolution vs. the 
      President's Budget.........................................    34
The Economy and Economic Assumptions.............................    37
    Table 6. Economic Projections: Administration, CBO, and 
      Private Forecasters........................................    43
    Table 7. Economic Assumptions of the Fiscal Year 2017 Budget 
      Resolution.................................................    44
    Table 8. Tax Expenditure Estimates by Budget Function, Fiscal 
      Years 2015-2019............................................    45
Macroeconomic Feedback Effects of Pro-Growth Policies............    55
Functional Presentation..........................................    57
    Principal Federal Responsibilities...........................    61
        National Defense.........................................    61
        International Affairs....................................    66
        Overseas Contingency Operations/Global War on Terrorism..    72
        Veterans Benefits and Services...........................    73
        Administration of Justice................................    81
        General Government.......................................    84
        Government-Wide Policy...................................    86
    Domestic Priorities..........................................    91
        General Science, Space, and Technology...................    91
        Energy...................................................    93
        Natural Resources and Environment........................    97
        Agriculture..............................................   101
        Commerce and Housing Credit..............................   101
        Transportation...........................................   104
        Community and Regional Development.......................   112
        Education, Training, Employment, and Social Services.....   115
        Health...................................................   120
        Income Security..........................................   123
        Other Discretionary Spending.............................   125
    Direct Spending..............................................   127
        Social Security..........................................   127
        Medicare.................................................   131
        Medicaid, the Affordable Care Act, and Related Programs..   142
        Income Support, Nutrition, and Related Programs..........   156
        Farm Support and Related Programs........................   162
        Banking, Commerce, Postal Service, and Related Programs..   163
        Student Loans, Social Services, and Related Programs.....   167
        Federal Lands and Other Resources........................   171
        Other Direct Spending....................................   173
    Financial Management.........................................   175
        Net Interest.............................................   175
        Allowances...............................................   176
        Undistributed Offsetting Receipts........................   176
Revenue and Tax Reform...........................................   179
Direct Spending Trends and Reforms...............................   183
    Table 9. Historical Means-Tested and Non-Means-Tested Direct 
      Spending...................................................   186
    Table 10. Projected Means-Tested and Non-Means-Tested Direct 
      Spending...................................................   187
The Long-Term Budget Outlook.....................................   189
Budget Process Reform............................................   191
Regulatory Budgeting.............................................   199
Section-by-Section Description...................................   201
The Congressional Budget Process.................................   223
    Table 11. Allocation of Spending Authority to House Committee 
      on Appropriations..........................................   225
    Table 12. Resolution by Authorizing Committee (On-budget 
      Amounts)...................................................   226
Reconciliation...................................................   229
Statutory Controls Over the Budget...............................   231
Enforcing Budgetary Levels.......................................   237
Accounts Identified for Advance Appropriations...................   243
Votes of the Committee...........................................   245
Other Matters Under the Rules of the House.......................   285
Minority Views...................................................   287
Concurrent Resolution on the Budget--Fiscal Year 2017 
  (legislative text).............................................   289
  
  
  
  
  
  
  
  
  
  
                                                                       
114th Congress    }                                     {       Report
                        HOUSE OF REPRESENTATIVES
 2d Session       }                                     {      114-470

======================================================================



 
                 CONCURRENT RESOLUTION ON THE BUDGET--
                            FISCAL YEAR 2017

                                _______
                                

  ESTABLISHING THE BUDGET FOR THE UNITED STATES GOVERNMENT FOR FISCAL 
  YEAR 2017 AND SETTING FORTH APPROPRIATE BUDGETARY LEVELS FOR FISCAL 
                        YEARS 2018 THROUGH 2026

                                _______
                                

 March 23, 2016.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

 Mr. Tom Price of Georgia, from the Committee on the Budget, submitted 
                             the following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                    [To accompany H. Con. Res. 125]

                              INTRODUCTION

                              ----------                              

    The budget this year faces two significant hurdles.
    First, due to continued delays in tackling the government's 
growing fiscal problems, the budget outlook has predictably 
worsened. Since just last August, the projected 10-year budget 
deficit has swollen by $1.5 trillion. That is how much 
additional savings the Budget Committee has had to identify, 
compared with a year ago, to achieve balance within a decade. 
It will require a greater number of policy changes, and swifter 
implementation, than before. These difficulties will continue 
to grow as long as Congress fails to take substantial action 
changing the Federal Government's fiscal course. In time the 
problem will become insurmountable.
    Second, this budget resolution gets no help from the 
economy. The policies of the current administration--excessive 
government spending, regulation, Obamacare, and all the rest--
are weighing down the economy. Growth is anemic, real household 
incomes are stagnant, labor force participation is low, many 
workers are underemployed. Debt stands at historically high 
postwar levels, and continues rising. For the past several 
years, the Congressional Budget Office [CBO] has been lowering 
its projections of average annual economic growth (see further 
discussion in the economics section of this report). A better 
economy would produce more revenue and put less strain on the 
government's safety net programs, easing the policy changes 
needed to attain fiscal sustainability. A stronger economy 
would generate greater revenue, and lower deficits, through 
growth, not tax hikes. CBO reports that an increase in real 
economic growth of just 0.1 percentage point would yield $327 
billion in deficit reduction--of which $286 billion would be 
from revenue.\1\ Under the President's policies, however, the 
recovery is historically weak, adding to the fiscal burdens. In 
the absence of stronger growth, the budget has to rely entirely 
on spending restraint.
---------------------------------------------------------------------------
    \1\Congressional Budget Office, The Budget and Economic Outlook: 
2016 to 2026, January 2016, Table B-1, p. 119.
---------------------------------------------------------------------------
    As was demonstrated in the 1990s, the formula for balancing 
the budget is a combination of fiscal restraint, solid economic 
growth, and limited regulation. Throughout that decade, 
Congress actually reduced annually appropriated 
``discretionary'' spending after adjusting for inflation. In 
1997, following 2 years of confrontation, President Clinton 
finally joined the Republican Congress in striving to surpass 
the timid and unsuccessful pursuit of mere deficit reduction, 
and commit to eliminating deficits--and to do so entirely 
through spending restraint. The Balanced Budget Act of 1997 was 
paired with tax cuts then estimated at $95.3 billion over 5 
years and $275.4 billion over 10 years.\2\ Perhaps not 
surprisingly, economic growth surged: Growth in real gross 
domestic product [GDP] exceeded 4 percent annually in the 
latter part of the decade. With this combination, the plan to 
reach balance in 5 years actually produced surpluses in 1 
year--surpluses that continued to grow.
---------------------------------------------------------------------------
    \2\See the Conference Report on the Taxpayer Relief Act of 1997 
(H.R. 2014), p. 807.
---------------------------------------------------------------------------
    To address today's fiscal problems, and to create a 
foundation for robust growth, this resolution retains 
longstanding convictions about budgeting and governing. It 
reverses the drift toward ever higher spending and larger 
government; it reinforces the innovation and creativity 
stirring in the myriad institutions and communities across the 
country; and it revitalizes the prosperity that creates ever-
expanding opportunities for all Americans to pursue their 
destinies. Like any good budget resolution, this one expresses 
a vision of governing, and of America itself. As described 
further in this report, this fiscal blueprint does the 
following:

     LBalances the budget within 10 years without 
raising taxes, and places the government on a path to paying 
off the debt.

     LEnsures a strong national defense, the highest 
priority of the Federal Government, through robust funding of 
troop training, equipment, and compensation.

     LRestores the principle of federalism, to 
encourage the innovation and creativity of State and local 
governments.

     LCalls for a fairer, simpler tax code to promote 
job creation and a healthy economy--an economy that ensures all 
Americans can prosper and achieve their goals.

     LSaves, strengthens, and secures Medicare, 
Medicaid, and other income security programs.

     LRepeals Obamacare, clearing the way for real, 
patient-centered health care reform.

     LReforms welfare and other automatic spending 
programs.

     LCreates reconciliation to advance solutions 
through Congress and to the President's desk.

    The guiding principles of the resolution follow in this 
introduction.

                          Balancing the Budget

    While some ``experts'' dismiss the balanced budget standard 
as a kind of quaint anachronism, nothing has come to replace it 
as a consensus norm for budgeting. As a result, fiscal policy 
is adrift, and increasingly unsustainable. Some--including the 
current administration--have tried to substitute intellectually 
sophisticated concepts, such as trying to limit deficits or 
debt as a share of the economy--yet there is no agreement on 
what the acceptable upper limits might be. Others have 
suggested allowing ``counter-cyclical'' policies in the near 
term while striving for ``long-term fiscal sustainability''--
with no sound definition of what the latter means. This 
formula, of course, merely rationalizes spending now while 
putting off restraint until later--so the restraint never 
happens.
    The current President's cavalier attitude about deficit 
spending adds to the problem. He has contended that deficits in 
the range of 3 percent of gross domestic product [GDP] are 
acceptable, as long as they remain relatively stable. The 
inevitable result: deficits are growing, inexorably. Only a 
firm commitment to balancing the budget will deliver a truly 
sustainable fiscal outlook.
    Until the early 1960s, policymakers broadly accepted the 
aim of balancing the Federal budget in peacetime. For many, the 
conviction was practical, uncomplicated common sense: 
Government simply should not outspend its resources. For 
others, such as Nobel Laureate James M. Buchanan, balancing 
budgets was an ethical commitment.

          Politicians prior to World War II would have 
        considered it to be immoral (to be a sin) to spend more 
        than they were willing to generate in tax revenues, 
        except during periods of extreme and temporary 
        emergency. To spend borrowed sums on ordinary items for 
        public consumption was, quite simply, beyond the pale 
        of acceptable political behavior. There were basic 
        moral constraints in place; there was no need for an 
        explicit fiscal rule in the written constitution.\3\
---------------------------------------------------------------------------
    \3\James M. Buchanan, ``Clarifying Confusion About the Balanced 
Budget Amendment,'' National Tax Journal, Vol. 48, No. 3, September 
1995, page 347.

    With his alternative views of deficit financing, John 
Maynard Keynes upended the norm of budgeting and challenged its 
ethical underpinnings. As James Q. Wilson put it, Keynes was 
---------------------------------------------------------------------------
more than an important economist:

          [H]e was a moral revolutionary. He subjected to 
        rational analysis the conventional restraints on 
        deficit financing, not in order to show that debt was 
        always good but to prove that it was not necessarily 
        bad. Deficit financing should be judged, he argued, by 
        its practical effect, not by its moral quality.\4\
---------------------------------------------------------------------------
    \4\James Q. Wilson, ``The Rediscovery of Character: Private Virtue 
and Public Policy,'' On Character (Washington DC: The AEI Press, 1995), 
p. 18.

    Although Keynes published his theory in the 1930s, it was 
not until three decades later that deficit financing became 
politically acceptable. Even then, President Johnson insisted 
on balancing his final budget, notwithstanding the costs of the 
Vietnam War and his ambitious Great Society programs. After 
that, however, policymakers increasingly found deficits to be 
tolerable, then acceptable--and then, predictably, deficit 
spending became chronic.
    The practical effect has been devastating. For a time in 
the early 1990s, it appeared the structural gap between outlays 
and revenues was so entrenched it could not be overcome. As 
noted previously, the balanced budgets later in that decade 
resulted from a sustained stretch of spending restraint and an 
unexpected boost in economic output. In January 2001, CBO was 
projecting budget surpluses totaling $5.6 trillion over 10 
years. Following 9-11, as Congress of necessity boosted 
resources for national defense and homeland security, lawmakers 
also gave up restraints on other spending. The tolerance for 
deficits returned, and the government has not seen a balanced 
budget since. In recent years, the red ink exceeded $1 trillion 
annually, so that nearly 40 percent of the government's 
spending was financed with borrowed money.

    It is noteworthy that the loss of surpluses and growth in 
deficits was not the result of tax cuts. In August 2001, and 
again in January 2002, CBO reported that the projected 10-year 
revenue impact of the 2001 tax relief package was about $1.3 
trillion, leaving $3.4 trillion in surpluses (economic and 
technical factors, as well as debt service, accounted for most 
of the remainder).\5\ In January 2002, well after the events of 
9-11, when CBO reported a steeper decline in surpluses, the 
estimated revenue effects of the tax relief package remained at 
$1.3 trillion; roughly $2.7 trillion of the change in the 
surplus/deficit outlook resulted from spending increases and 
economic and technical factors.\6\ Subsequent data show that 
from 2002 through 2011, of the $11.7-trillion total surplus 
reduction/deficit increase, only $1.5 trillion resulted from 
the tax cuts of 2001 and 2003.
---------------------------------------------------------------------------
    \5\Congressional Budget Office, The Budget and Economic Outlook: An 
Update, August 2001, Table 2, p. x.
    \6\Congressional Budget Office, The Budget and Economic Outlook: 
Fiscal Years 2003-2012, January 2002, Summary Table 1, p. xiv.
---------------------------------------------------------------------------
    Today, in the absence of the balanced budget principle, the 
only fiscal guideline is the modern, relativistic pay-as-you-go 
concept, which merely ratifies existing deficits as the measure 
of budgetary rectitude--no matter how large those deficits 
might be. Thus, the proponents of the Affordable Care Act could 
boast the health care program was fiscally ``responsible'' 
because it did not increase deficits--which already exceeded a 
trillion dollars a year--while it recklessly added trillions 
more to government spending.
    The durability of the balanced budget principle is 
demonstrated even by the Keynesian-leaning Congressional Budget 
Office itself. Every time the CBO publishes its regular updates 
of budget and economic conditions, the first item it reports is 
the magnitude of the deficit or surplus--that is, the 
relationship between total outlays and total tax revenue. It is 
the very same measure that underlies the balanced budget 
principle. Further, CBO's clear implication is that the more 
spending exceeds revenue, and the more rapidly the two diverge, 
the more unstable is the government's fiscal condition.\7\ 
There is simply no more straightforward measure of the 
government's fiscal health and stability.
---------------------------------------------------------------------------
    \7\For example, the first three sentences of the summary in the 
recent The Budget and Economic Outlook: 2016 to 2026 (p. 1) read: ``In 
2016, the Federal budget deficit will increase, in relation to the size 
of the economy, for the first time since 2009, according to the 
Congressional Budget Office's estimates. If current laws generally 
remained unchanged, the deficit would grow over the next 10 years, and 
by 2026 it would be considerably larger than its average over the past 
50 years, CBO projects. Debt held by the public would also grow 
significantly from its already high level.''
---------------------------------------------------------------------------
    CBO's projections make clear the temporary decline in 
deficits over the past few years is over; as predicted, 
deficits are now rising again (see Figure 1). Some details 
about that trend include the following:\8\
---------------------------------------------------------------------------
    \8\Congressional Budget Office, The Budget and Economic Outlook: 
2016 to 2026, January 2016.

     LThe deficit in the current year--fiscal year 
2016--will rise to $544 billion, an increase of $105 billion 
---------------------------------------------------------------------------
from the prior year ($439 billion).

     LDeficits will continue to rise in subsequent 
years and reach $1.4 trillion in 2026, CBO estimates. At these 
levels, the deficit would rise from 2.9 percent of GDP in 
fiscal year 2016 and to 4.9 percent in fiscal year 2026--well 
above the 50-year historical average of 2.7 percent of GDP.

     LCBO has increased its 10-year deficit projection 
by $1.5 trillion compared with estimates as recently as last 
August, to $9.4 trillion. That increase is largely due to the 
anemic Obama economy: CBO projects $771 billion less tax 
revenue over 10 years due to ``slower growth in economic output 
over the 10-year projection period.''\9\ This is the result of 
a weakening economic outlook, not because of any tax changes 
legislated by the Congress.
---------------------------------------------------------------------------
    \9\Ibid., p. 11.

    FIGURE 1

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


      CBO also blames $425 billion of the deficit 
increase on reduced revenue due to Congress's recent extension 
of certain tax provisions that were scheduled to expire. That, 
however, is merely an artifact of CBO's scoring conventions. 
These are not new tax cuts; Congress merely continued tax 
relief policies that already existed. By law, CBO is required 
to compare the extension of such tax relief provisions with the 
higher revenue levels that would have occurred if the policies 
had expired as scheduled.\10\ Putting it differently, Congress 
chose not to raise taxes, which would have resulted from 
failing to extend these provisions.
---------------------------------------------------------------------------
    \10\See section 257 of the Balanced Budget and Emergency Deficit 
Control Act of 1985 (Public Law 99-177).

    While the President claims some deficit reduction in his 
own budget--largely from $3.4 trillion in new taxes over 10 
years--he never tries to reach balance. In fact, deficits under 
the President's budget increase starting in 2019, and approach 
$800 billion in 2026. This is largely due to $2.5 trillion in 
spending increases over the decade. This is not a fiscal 
policy; it is an abandonment of sound fiscal norms.
    The chronic and growing deficits that will result will push 
up debt from its already historically high levels. Due to 
profligate spending--and the President's resistance to working 
with Congress on controlling spending--total debt on Obama's 
watch has almost doubled, to nearly $19 trillion. CBO projects 
that debt held by the public will reach $14.0 trillion, or 75.6 
percent of GDP, at the end of fiscal year 2016, up $861 billion 
from its $13.1 trillion level (73.6 percent of GDP) at the end 
of fiscal year 2015.\11\ By the end of fiscal year 2026, CBO 
estimates debt held by the public will reach $23.8 trillion, or 
86 percent of GDP--a $9.8 trillion increase over the next 10 
years. This is by far the highest level of debt since just 
after World War II. A significant difference, however, is that 
the post-war debt resulted from large but temporary surges of 
spending to save the free world. Today's deficits and debt are 
the product of permanent automatic spending programs, and these 
trends are occurring even as the government has reduced its 
spending for military and diplomatic activities overseas.
---------------------------------------------------------------------------
    \11\Debt held by the public increased about $300 billion in 2015 
and is projected to rise by $861 billion in 2016.
---------------------------------------------------------------------------
    Gross Federal debt, which includes funds owed to the Social 
Security Trust Fund and other Federal accounts, is projected to 
rise from $18.1 trillion at the end of 2015 to $29.3 trillion 
in 2026--an $11.2 trillion increase.
    A rising debt level is ultimately unsustainable because its 
growth eventually begins to exceed that of the overall economy. 
As a result, debt service costs absorb an increasing share of 
national income and the country must borrow an increasing 
amount each year--likely in the face of gradually higher 
interest rates--to both fund its ongoing services and make good 
on its previous debt commitments. Ultimately, this dynamic 
leads to a decline in national saving and a ``crowding out'' of 
private investment, sapping economic output and diminishing the 
country's standard of living. In a worst-case scenario, this 
dynamic could also lead to a full-blown debt crisis, which 
would not only be devastating at the macroeconomic level, but 
would also inflict acute pain upon families and businesses.
    Investors and businesses make decisions on a forward-
looking basis. They know that today's large debt levels are 
simply tomorrow's tax hikes, interest rate increases, or 
inflation--and they act accordingly. This debt overhang, and 
the uncertainty it generates, can therefore weigh on growth, 
investment, and job creation.
    Interest payments on the debt (the ``legacy cost'' of 
deficit spending) will sum to a staggering $5.6 trillion over 
the next decade according to CBO. These payments threaten to 
overwhelm other spending priorities in the budget. In 2012, 
Deloitte LLP--a tax, audit, and consulting firm--discussed the 
ways in which debt will hamper U.S. competitiveness in the 
years ahead.

          [A] great variety of meaningful investments will 
        almost certainly be left undone simply because interest 
        payments will push them out of the budget. This is the 
        silent cost of prior debts that, unless explicitly 
        recognized, crucially leads policymakers to 
        underestimate the effect that prior deficits have 
        already had on this decades planned expenditures.\12\
---------------------------------------------------------------------------
    \12\Deloitte LLP, The Untold Story of America's Debt, June 2012.

    Debt service is already projected to dominate the budget. 
Within a decade, the government will reach a point at which it 
spends more on interest payments that it does on national 
defense, Medicaid, Federal education spending, and 
infrastructure, among others (see Figure 2). Interest on the 
debt will become the government's third largest program, 
---------------------------------------------------------------------------
following only Social Security and Medicare.

    FIGURE 2
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    All these factors point to the need for returning to the 
balanced budget standard. It is also the soundest principle for 
limiting government. A balanced budget commitment establishes 
real-time restraint on the expansion of the public sector: The 
size and scope of government, as measured by its spending, may 
not exceed the amount that taxpayers provide and the economy 
will sustain. This empowers the people, on an ongoing basis, to 
hold their government in check.
    The pursuit of balance also has distinct economic and 
fiscal benefits. Nearly all economists, including those at the 
CBO, explain that reducing budget deficits (thereby bending the 
curve on debt levels) increases the pool of national savings 
and boosts investment, thereby raising economic growth and job 
creation.
    The greater economic output that stems from a large deficit 
reduction package would have a sizeable impact on the Federal 
budget. For instance, higher output would lead to greater 
revenues through the increase in taxable incomes. Lower 
interest rates, and a reduction in the stock of debt, would 
lead to lower government spending on net interest expenses. 
Former Federal Reserve Chairman Bernanke has said that putting 
in place a credible plan to reduce future deficits ``would not 
only enhance economic performance in the long run, but could 
also yield near-term benefits by leading to lower long-term 
interest rates and increased consumer and business 
confidence.''\13\
---------------------------------------------------------------------------
    \13\Bernanke speech at the Committee for a Responsible Federal 
Budget Fiscal Accountability conference, 14 June 2011.
---------------------------------------------------------------------------
    For all these reasons, this budget resolution restores the 
balanced budget standard, and then maintains it--putting the 
government on a path to paying off the debt.

                      Automatic Spending Programs

    Just as important as pursuing balance is the way in which 
lawmakers achieve it. Some experts and policymakers advocate a 
mix of spending restraint and tax increases--the so-called 
``balanced'' approach--as if the two were merely opposite sides 
of the same coin. That sterile, policy-neutral concept, 
however, masks the fundamental cause and effect of government 
budgeting: Spending comes first. Spending--one of the best 
measures of the size and scope of government--is how government 
does what it does. Government's programs and activities exist 
only if government spends money to implement them. ``In a 
fundamental sense,'' writes longtime budget expert Allen 
Schick, ``the Federal Government is what it spends.''\14\ It is 
because of spending that the government taxes and borrows. 
Spending is the root cause of all other fiscal consequences.
---------------------------------------------------------------------------
    \14\Allen Schick, The Federal Budget: Politics, Policy, Process 
(Washington DC: The Brookings Institution Press, 2007), page 2.
---------------------------------------------------------------------------
    CBO's own figures further demonstrate that spending control 
is the indispensable element of controlling the budget. In its 
most recent long-term projections, CBO shows that even 
excluding interest payments, government programs will outspend 
revenue persistently over the next 25 years. Indeed, while CBO 
projects tax revenue to rise to historically high levels--19.4 
percent of GDP by 2040, well above the 17.4-percent average of 
the past 50 years--spending will still persistently outpace 
revenue (see Figure 3). The inevitable debt service will drive 
total spending above 25 percent of GDP, generating relentlessly 
deepening deficits. Only by controlling spending can Congress 
alter this disastrous course.\15\
---------------------------------------------------------------------------
    \15\Congressional Budget Office, The 2015 Long-Term Budget Outlook, 
June 2015, Summary Table 1.
---------------------------------------------------------------------------
    That requires controlling automatic, or direct, spending. 
Unlike the government's ``discretionary'' spending, in which 
Congress sets fixed limits on total budget authority, direct 
(or ``mandatory'') spending is open-ended and flows from 
effectively permanent authorizations. Programs funded this 
way--typically called ``entitlements''--pay benefits directly 
to groups and individuals without an intervening appropriation. 
They spend without limit. Their totals are determined by 
numerous factors outside the control of Congress: caseloads, 
the growth or contraction of GDP, inflation, and many others. 
To put it simply, spending in these programs is uncontrolled 
and uncontrollable--because it is designed to be.
    The list of these programs is long and broad. It includes 
the social insurance programs, Social Security and Medicare; 
other health spending, such as Medicaid and the Affordable Care 
Act; income support, nutrition assistance, unemployment 
compensation, disability insurance, student loans, and a range 
of others.

    FIGURE 3
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    In 1965, as President Johnson's Great Society programs were 
being enacted, net direct spending represented about 27 percent 
of the budget. By 1974, when the Congressional Budget Act was 
adopted, it had swollen to 41 percent of total spending. Today 
it has surged to nearly 60 percent. Combined with net 
interest--a mandatory payment in the true sense of the word--
the government's automatic direct spending consumes more than 
two-thirds of the budget,\16\ and in just 10 years it will 
swell to 78 percent\17\ (see Figure 4). It is the main driver 
of the government's debt.
---------------------------------------------------------------------------
    \16\Congressional Budget Office, The Budget and Economic Outlook: 
2016 to 2026, January 2016, Table 3-1.
    \17\Ibid., Table 1-2.
---------------------------------------------------------------------------
    Clearly this problem with direct spending has been building 
for decades, yet lawmakers have found it difficult to build an 
enduring consensus for addressing it. With each year that 
passes, the challenge of spending control grows more difficult, 
because the necessary changes in programs become larger and, in 
many cases, more wrenching. At some point the programs will 
simply collapse under their own weight. Those who claim to 
``protect'' them by resisting reform only ensure their demise.
    Gaining control of spending need not be seen, however, as 
some daunting exercise in ``mindless austerity,'' as the 
President so ominously puts it. As long as reform is necessary, 
it can be approached as an opportunity to save and strengthen 
these programs--to make them better for the people they are 
intended to serve.
    Consider a few examples.
    This report proposes a new Medicare option that would 
transform this retirees' health coverage program from a 
government-run, price-controlled bureaucracy to a personalized 
system in which seniors have the option of choosing their 
health coverage best suited to their needs from a range of 
commercial plans. Traditional fee-for-service Medicare would 
always be an option available to current seniors, those near 
retirement, and future generations of beneficiaries. Fee-for-
service Medicare, along with private plans providing the same 
level of health coverage, would compete for seniors' business, 
just as Medicare Advantage does today. The new program, 
however, would also adopt the competitive structure of Medicare 
Part D, the prescription drug benefit program, to deliver 
savings for seniors in the form of lower monthly premium costs.

    FIGURE 4
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    In short, this Medicare reform would give retired 
Americans, not the government, the ultimate leverage over what 
kind of coverage they will have--and the government provides 
them financial assistance in making the choices.
    Another area of automatic spending, assistance for low-
income Americans, should be revised to encourage self-
sufficiency, not to trap people in dependency. Clearly, persons 
with chronic disadvantages need and deserve a sturdy safety 
net. Others require assistance at particular times of economic 
downturns or personal misfortune. Still, the most compassionate 
way to provide government assistance is to help free 
individuals from the need for it. Welfare programs should 
encourage recipients toward supporting themselves to the 
greatest degree possible. As was proved with the successful 
welfare reform of the 1990s, when struggling people are 
challenged to work and earn on their own, they rise to the 
occasion--and they are better off for it.
    It should be noted, too, that government is not the sole 
source of the many domestic benefits Americans receive--it is 
not even the primary one. Every benefit the government 
ostensibly ``provides'' actually draws from the abundant 
resources of the Nation's free market system. The government 
could not maintain Medicare, or Social Security, or its 
numerous safety net programs without the funding generated by 
the economy. Communities could not build schools and hospitals 
without local economies sufficiently prosperous to support 
them. This is why the fiscal policy of this budget--restraining 
spending and reducing deficits--is crucial to the well-being of 
all Americans. Those who strive to pull themselves out of 
difficulties benefit most from the expanding opportunities and 
rising incomes that only a prosperous economy can provide.
    Finally, policymakers must embrace the recognition that 
government can never substitute for nature's safety net: the 
family. For generation upon generation, the family has been the 
main source of comfort, security, and economic stability for 
the individual. It is where moral values and a sense of 
responsibility grow. The family reinforces the individual's 
place in the larger community. As government seeks to support 
those who lose any connection to a family, it should take care 
not to contribute to the dissolution of families. Government 
programs should aim to strengthen the family, the most 
important and enduring institution in society.

                               Federalism

    The republic of the United States reached a turning point 
in 1936: That was the first peacetime year in which the Federal 
Government's total spending exceeded the combined outlays of 
the State and local governments. ``It can even be argued,'' 
writes Amity Shlaes, ``that one year--1936--created the modern 
entitlement challenge that so bedevils both parties.''\18\
---------------------------------------------------------------------------
    \18\Amity Shlaes, The Forgotten Man: A New History of the Great 
Depression (New York: Harper Perennial, 2008), page 11.
---------------------------------------------------------------------------
    As the 20th century unfolded, the national government's 
dominance--both fiscally and as the central governing 
authority--expanded. This was understandable during times of 
war--especially World War II--when the entire Nation was under 
threat. The notion continued to expand, however, into an ever-
growing range of domestic policies. President Roosevelt's New 
Deal was, of course, a major step. Later came President 
Truman's unsuccessful pursuit of nationalized health care, and 
President Johnson's Great Society. By the late 1980s, health 
care once again got drawn in, with some proposing a single-
payer Canadian-style health care system for the United States. 
In some respects, this trend culminated with Obamacare.
    Over time, States in some respects have been reduced to 
carrying out the wishes of Washington, rather than serving as 
the ``laboratories of democracy.''
    This is precisely contrary to the Founders' vision:

          The powers delegated by the proposed Constitution to 
        the Federal Government are few and defined,'' Madison 
        wrote. ``Those which are to remain in the State 
        governments are numerous and indefinite. The former 
        will be exercised principally on external objects, as 
        war, peace, negotiation, and foreign commerce; with 
        which last the power of taxation will, for the most 
        part, be connected. The powers reserved to the several 
        States will extend to all the objects which, in the 
        ordinary course of affairs, concern the lives, 
        liberties, and properties of the people, and the 
        internal order, improvement, and prosperity of the 
        State.\19\
---------------------------------------------------------------------------
    \19\James Madison, Federalist 45.

    As succinctly put in the Tenth Amendment: ``The powers not 
delegated to the United States by the Constitution, nor 
prohibited by it to the States, are reserved to the States 
respectively, or to the people.''
    Indeed, Madison argued the Federal Government would depend 
on the States--not the other way around: ``The State 
governments may be regarded as constituent and essential parts 
of the Federal Government; whilst the latter is nowise 
essential to the operation or organization of the former.''\20\ 
This point is proved in reality by the countless activities, 
essential to the lives of individuals and communities, that 
predated the national government and would continue without it. 
Even if the 50 States stood as separate entities, they would 
still operate schools and hospitals; they would find ways to 
build roads and bridges; scientific research would continue; 
energy and communications companies would emerge.
---------------------------------------------------------------------------
    \20\Ibid.
---------------------------------------------------------------------------
    This is not to say Americans would be better off without 
the Federal Government. Their security and prosperity are 
vastly enhanced by the voluntary unity reflected in the bonds 
of the national Constitution. The point is simply that the 
Federal Government's principal role is to protect the security 
of the Nation, and to maintain an environment that supports the 
initiative and creativity possible only through the diversity 
of the several States and the bonds of civil society.
    The reversal of this concept that developed over the past 
100 years or so also has fiscal consequences. Federal 
Government resources cannot maintain the overreach of its 
governing ambitions. That is the message of Washington's 
current, catastrophic spending path. To restore fiscal 
sustainability, Congress sooner or later will have to consider 
realigning the roles of different levels of government. It will 
have to reinstitute the practice of federalism.
    This will remain a necessity even if Congress gains control 
of entitlement spending. Yet the fiscal concerns are only part 
of the reason. The increasing centralization of government 
smothers the energy of State and local policymakers. Restoring 
State autonomy will deliver benefits for the entire Nation in 
critical areas such as education, health care, infrastructure, 
energy, the environment, and employment.
    The budget resolution supports these aims. It promotes 
State flexibility in areas such as Medicaid and the 
Supplemental Nutrition Assistance Program. It encourages State 
and local initiative in education. It sheds the conceit that 
Washington knows best what is right for the people. The very 
structure of this report reflects a distinction between those 
activities required of the Federal Government from those best 
suited to States and localities and the private sector (see the 
explanation in Functional Presentation).

                   Restoring Congressional Budgeting

    The congressional budget process, enacted in 1974, has 
rarely worked as designed. Deadlines in the Congressional 
Budget Act are missed far more often than made, rules are often 
skirted, loopholes in spending disciplines exploited. Since 
1998, the House and Senate have failed nine times to agree on a 
budget resolution, the cornerstone of the process.
    These failures have unquestionably worsened in recent 
years. Last year was the first time since 2001 that the House 
and Senate agreed to a 10-year balanced budget plan. In recent 
years, lawmakers manufactured ad hoc procedures that have done 
next to nothing to stabilize the government's catastrophic 
long-term fiscal outlook. For a while, the budgetary 
mismanagement became the new norm. The budget calendar was not 
merely ignored, it was deliberately breached, rendering the 
fiscal year irrelevant and leading to a stream of omnibus 
spending bills of varying durations negotiated by a handful of 
leaders--undermining the committee system and depriving 
lawmakers of the deliberation so central to the legislative 
process. Though Congress has made progress, it is still 
struggling to overcome many of those vices.
    This unraveling does have profound consequences. The first 
and most obvious is that without regular budget resolutions, 
Congress has all but abandoned any serious attempt to manage 
fiscal policy. It is true the Budget Control Act of 2011 
established caps on discretionary spending (which have been 
adjusted upward since then), and applied the automatic 
enforcement regime of sequestration. At the same time, however, 
it did nothing to rein in direct spending, the greatest threat 
to the government's fiscal stability. None of the other 
manufactured procedures employed since then has accomplished 
much along these lines either.
    Equally troubling is the effect on Congress's ability to 
govern. The failure in budgeting is the most visible and 
regular evidence of Congress's decline as a governing 
institution: ``The importance of conflicts over the size and 
distribution of the budget--failure to pass a budget on time or 
at all has become a sign of inability to govern--testifies to 
the overriding importance of budgeting. Nowadays, the State of 
the Union and the state of the budget have become essentially 
equivalent.''\21\
---------------------------------------------------------------------------
    \21\Aaron B. Wildavsky and Naomi Caiden, The New Politics of the 
Budgetary Process--Third Edition (New York: Addison-Wesley Educational 
Publishers Inc., 1997).
---------------------------------------------------------------------------
    Thus, the collapse of budgeting hastens the erosion of 
congressional authority. The more Congress tolerates its fiscal 
ineptitude, the more inept it becomes at legislating in 
general.
    Yet as discouraging as these conditions may be, they can be 
corrected. The restoration of congressional budgeting can 
start, and is essential to, the regeneration of Congress as a 
governing institution. This can follow two tracks.
    First, it is imperative that Congress this year pursue, as 
far as possible, the ``regular order'' of budgeting envisioned 
in the Congressional Budget Act. The existing process is far 
from perfect. It is complicated, time-consuming, and often 
frustrating. The estimating conventions underlying budget 
procedures reflect a distinct bias in favor of higher spending 
and larger government.
    Nevertheless, if employed, the process does provide a 
general schedule for spending and tax bills. The budget 
resolution represents an agenda and work plan in legislative 
form unmatched by any other procedure. It gives coherence to 
the legislature's many fiscal measures that did not exist 
before the Congressional Budget Act was adopted. With the 
creation of the budget resolution, Congress's budget became the 
working blueprint for fiscal policy, embracing lawmakers' 
consensus vision of governing.
    Returning to the regular order also offers lawmakers an 
opportunity to learn for themselves, directly, whether the 
process truly is ``broken,'' and if so by how much. ``I could 
easily argue that the budget process isn't broken at all,'' 
remarked former House Budget Committee Chairman Jim Nussle at a 
September 2011 committee hearing on process reform. ``[T]oday 
the budget process is not even being used or at best is simply 
being ignored.''\22\
---------------------------------------------------------------------------
    \22\Jim Nussle, ``Perspectives on Budget Process Reform,'' 
testimony to the Committee on the Budget, U.S. House of 
Representatives, 22 September 2011.
---------------------------------------------------------------------------
    Recently, various Members and experts in the policy 
community have offered a range of proposals built on a kind of 
problem-solving model. That is, proponents identify a specific 
weakness in the process--say, the difficulty Congress has in 
passing annual spending bills on time--and then offer an 
ostensible solution, such as a 2-year budget and appropriations 
cycle. Some argue that the President should be more involved in 
budget development at the beginning of the process, as a 
possible means of heading off crisis-style confrontations late 
in the year.
    Many of these proposals focus on practical matters--how to 
make budget procedures more efficient and workable, or how to 
enhance enforcement of budget levels. All this is perfectly 
reasonable. A budget process, no matter how skillfully 
designed, is pointless if lawmakers cannot or will not use it, 
or if it fails to achieve real fiscal control.
    Nevertheless, the focus on these piecemeal changes may slow 
the momentum toward the kind of broad rewrite of the process 
that is necessary. The process designed in 1974 was complicated 
to begin with; it merely added new procedures onto existing 
spending and tax practices. Since then, Congress has enacted 
additional layers of complexity, such as the Balanced Budget 
and Emergency Deficit Control Act of 1985, the Budget 
Enforcement Act of 1990, and the Statutory Pay-As-You-Go Act of 
2010, among others. Given all this, it may be time to dismantle 
the entire process and build a new one. The lessons of the past 
four decades of congressional budgeting will certainly inform 
that development. Still, in thinking about a new process, 
lawmakers should step back and ask a threshold question: What 
is the congressional budget process for?
    The obvious first answer is fiscal control. That, however, 
is part of a more fundamental act: the act of governing. 
Because budgeting truly is governing, the budget process should 
be seen as a principal means of exercising constitutional 
government.
    The Constitution does not prescribe how big government 
should be, but it does establish a framework for limiting 
government. One of the best ways to determine that limit is to 
limit spending--one of the best measures of the size and scope 
of government.
    The budget also is Congress's main instrument for 
policymaking, the legislature's essential authority. As Madison 
wrote: ``This power of the purse may, in fact, be regarded as 
the most complete and effectual weapon with which any 
constitution can arm the immediate representatives of the 
people, for obtaining a redress of every grievance, and for 
carrying into effect every just and salutary measure.''\23\ Any 
new budget process should enhance Congress's policymaking role.
---------------------------------------------------------------------------
    \23\The Federalist, No. 58.
---------------------------------------------------------------------------
    The process also must reinforce the balance of powers, one 
of the most critical protections of liberty. For nearly a half 
century after enactment of the 1921 Budget and Accounting Act--
which attempted to straddle the separation of powers by 
establishing an executive-centered budget process modeled after 
Great Britain's--the presidency grew increasingly powerful. 
Starting in the 1950s, presidents began deliberately tying 
their budgets together with their legislative programs, 
increasing their ability to set the legislative agenda, and 
helping sustain what Schlesinger called ``the imperial 
presidency.''\24\ The 1974 Congressional Budget Act was, in 
part, an attempt to restore the legislature's agenda-setting 
role. The new budget process should advance that effort.
---------------------------------------------------------------------------
    \24\Arthur M. Schlesinger Jr., The Imperial Presidency, (New York: 
Houghton Mifflin Company, 2004).
---------------------------------------------------------------------------
    Budgeting also should be an instrument for enhancing 
congressional oversight. There is no better way to get the 
attention of executive agencies than by controlling their 
funding. The budget process should encourage appropriations 
subcommittees and authorizing committees to use the tool of the 
budget aggressively, and to control the ever-expanding 
administrative state.
    Finally, just as the restoration of sound budgeting for how 
the Federal Government spends is critical to the promotion of 
economic growth debt-reduction, federalism, and ordered 
liberty, so too is the introduction of budgeting for how the 
Federal Government directs others to spend: regulatory 
budgeting.
    When regulation is needed, it can be done in more cost-
effective ways. Before it is imposed, Congress can budget for 
how much new regulation, if any, can sustainably be imposed on 
America's economy year by year. The undue brake on economic 
growth that Federal regulation sets must be controlled. It 
makes eminent sense to do that using the kinds of budgeting 
tools Congress applies to put the brakes on runaway Federal 
spending. To date, Congress has not adopted regulatory 
budgeting tools to manage the Federal regulatory footprint in 
the way it manages Federal spending. Neither has it imposed 
robust statutory controls against Federal regulators' abilities 
to burden America's workers and economy with excessively 
expensive and insufficiently effective Federal regulations. The 
time has come to do both.

                               Conclusion

    As described at the outset, this budget resolution 
expresses a vision; its contours are detailed throughout the 
text of this report. It is also an instrument for realizing 
that vision. Its allocations of spending authority implement 
the budget's priorities; its fiscal path--achieving balance 
within 10 years--restores the sound fiscal norm that long kept 
spending, and the size of government itself, in check. It is an 
instrument for true fiscal sustainability, and for maintaining 
America's unique and exceptional brand of constitutional 
government.

                                                                                 TABLE 1.--FISCAL YEAR 2017 BUDGET RESOLUTION TOTAL SPENDING AND REVENUE
                                                                                                        [In millions of dollars]
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                        Fiscal year                             2017         2018         2019         2020         2021         2022         2023         2024         2025         2026            2017-2021             2017-2026
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                 SUMMARY
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total spending:
  BA......................................................    3,900,967    3,848,121    4,007,366    4,179,555    4,309,637    4,449,397    4,651,534    4,839,943    5,000,532    5,173,555        20,245,646            44,360,606
  OT......................................................    3,882,461    3,849,342    3,988,526    4,163,470    4,301,136    4,445,385    4,621,834    4,791,398    4,947,282    5,136,345        20,184,934            44,127,178
On-budget:
  BA......................................................    3,086,332    2,984,016    3,084,551    3,192,964    3,254,411    3,319,284    3,443,779    3,551,204    3,624,651    3,704,462        15,602,273            33,245,653
  OT......................................................    3,072,428    2,990,509    3,071,424    3,182,999    3,252,237    3,321,899    3,420,907    3,509,889    3,578,931    3,675,084        15,569,597            33,076,306
Off-budget:
  BA......................................................      814,635      864,105      922,815      986,592    1,055,226    1,130,113    1,207,755    1,288,739    1,375,882    1,469,093         4,643,372            11,114,954
  OT......................................................      810,033      858,833      917,101      980,471    1,048,900    1,123,486    1,200,927    1,281,509    1,368,352    1,461,261         4,615,337            11,050,872
Revenues:
  Total...................................................    3,521,497    3,659,353    3,789,990    3,958,001    4,117,566    4,285,579    4,464,033    4,653,472    4,859,831    5,075,638        19,046,407            42,384,960
  On-budget...............................................    2,692,937    2,799,875    2,902,418    3,040,763    3,168,226    3,301,656    3,443,940    3,595,338    3,762,041    3,936,429        14,604,219            32,643,623
  Off-budget..............................................      828,560      859,478      887,572      917,238      949,340      983,923    1,020,093    1,058,134    1,097,790    1,139,209         4,442,188             9,741,337
Recommended Change in Revenues:
  Total...................................................      +10,700      +26,000      +43,000      +41,400      +42,000      +41,900      +43,400      +43,400      +42,200      +41,000          +163,100              +375,000
  On-budget...............................................      +10,700      +26,000      +43,000      +41,400      +42,000      +41,900      +43,400      +43,400      +42,200      +41,000          +163,100              +375,000
  Off-budget..............................................            0            0            0            0            0            0            0            0            0            0                 0                     0
Surplus/Deficit (-):
  Total...................................................     -381,672     -198,531     -207,457     -194,777     -181,008     -141,019     -122,876      -76,487      -26,040       28,731        -1,163,444            -1,501,134
  Macroeconomic Impact of Deficit Reduction Path..........      -20,709       -8,542       -8,921       10,692        2,562       18,787       34,925       61,439       61,411       89,438           -24,917               241,084
  On-budget...............................................     -379,491     -190,634     -169,006     -142,236      -84,011      -20,243       23,033       85,449      183,110      261,345          -965,378              -432,683
  Off-budget..............................................       18,527          645      -29,529      -63,233      -99,560     -139,563     -180,834     -223,375     -270,562     -322,052          -173,149            -1,309,535
Debt Held by the Public (end of year).....................   14,400,000   14,726,000   14,976,000   15,190,000   15,436,000   15,576,000   15,808,000   15,934,000   15,812,000   15,960,000
Debt Subject to Limit (end of year).......................   19,848,354   20,314,389   20,647,523   20,904,600   21,161,285   21,296,902   21,510,772   21,598,523   21,373,459   21,412,056
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                               BY FUNCTION
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
National Defense (050):
  BA......................................................      559,254      593,759      607,553      619,761      631,991      644,193      657,101      670,425      683,163      698,114         3,012,318             6,365,314
  OT......................................................      566,461      574,049      592,442      605,138      617,088      634,044      641,635      649,501      667,016      681,216         2,955,179             6,228,591
International Affairs (150):
  BA......................................................       39,780       39,778       39,777       38,852       38,726       39,784       40,805       41,694       42,622       43,596           196,913               405,413
  OT......................................................       43,705       40,260       39,273       38,830       38,404       38,893       39,506       40,102       40,735       41,473           200,471               401,179
General Science, Space and Technology (250):
  BA......................................................       30,215       30,855       31,500       32,174       32,879       33,585       34,326       35,070       35,845       36,658           157,623               333,107
  OT......................................................       30,451       30,654       31,174       31,732       32,297       32,957       33,678       34,390       35,148       35,933           156,308               328,414
Energy (270):
  BA......................................................       -2,914        1,601        1,675        1,683        1,747        1,816        1,888        1,959        2,029         -189             3,792                11,295
  OT......................................................        1,442        1,119        1,239        1,155        1,164        1,186        1,218        1,243        1,263         -927             6,119                10,102
Natural Resources & Environment (300):
  BA......................................................       38,641       39,185       39,720       40,862       40,712       41,518       42,878       43,874       44,845       44,026           199,120               416,261
  OT......................................................       41,170       41,109       40,846       42,022       41,151       41,802       43,057       43,489       44,369       43,059           206,298               422,074
Agriculture (350):
  BA......................................................       23,809       23,344       21,067       20,012       19,674       19,600       19,934       19,961       20,283       20,724           107,906               208,408
  OT......................................................       24,912       22,883       20,267       19,399       19,097       19,021       19,502       19,463       19,760       20,195           106,558               204,499
Commerce & Housing Credit (370):
  On-budget:
    BA....................................................       -3,096       -4,977       -7,162       -9,990      -11,207      -11,154      -11,122      -11,361      -10,905      -11,363           -36,432               -92,337
    OT....................................................      -17,777      -22,531      -21,735      -23,337      -25,448      -26,187      -28,281      -29,993      -30,126      -30,184          -110,828              -255,599
  Off-budget:
    BA....................................................          129       -3,473       -3,662       -4,024       -4,392       -4,621       -4,850       -5,087       -5,335       -5,701           -15,422               -41,016
    OT....................................................          205       -3,444       -3,647       -4,014       -4,387       -4,617       -4,845       -5,083       -5,330       -5,696           -15,287               -40,858
Transportation (400):
  BA......................................................       87,879       89,099       90,727       84,831       64,777       65,727       66,762       67,794       68,887       70,000           417,313               756,483
  OT......................................................       90,628       89,793       91,114       92,137       86,962       77,691       73,991       73,041       72,534       72,380           450,634               820,271
Community & Regional Development (450):
  BA......................................................        7,561        6,381        5,721        5,749        5,815        6,021        6,250        6,683        8,183        8,374            31,227                66,738
  OT......................................................       20,693       17,774       15,678       13,538       11,435        8,929        8,113        6,908        8,278        8,442            79,118               119,788
Education,Training,Employment,and Social Services (500):
  BA......................................................       78,795       84,083       85,451       86,862       88,102       88,818       93,490       94,414       95,476       96,049           423,293               891,540
  OT......................................................       91,997       85,833       86,078       87,440       88,757       89,802       92,500       95,172       96,493       97,506           440,105               911,578
Health (550):
  BA......................................................      465,184      366,670      369,978      381,404      390,584      398,225      407,107      416,534      426,598      454,051         1,973,820             4,076,335
  OT......................................................      458,633      375,603      370,695      380,274      388,437      395,694      404,121      413,211      422,901      449,930         1,973,642             4,059,499
Medicare (570):
  BA......................................................      590,086      583,750      643,371      684,911      731,321      817,737      834,731      839,165      914,301      973,544         3,233,439             7,612,917
  OT......................................................      590,068      583,690      643,267      684,816      731,237      817,648      834,638      839,021      914,164      973,401         3,233,078             7,611,950
Income Security (600):
  BA......................................................      497,523      471,709      480,783      491,841      479,718      488,273      497,873      507,892      518,397      529,675         2,421,574             4,963,684
  OT......................................................      491,960      461,357      473,392      483,961      472,117      486,470      491,557      495,442      507,575      525,323         2,382,787             4,889,154
Social Security (650):
  On-budget:
    BA....................................................       37,199       40,124       43,373       46,627       50,035       53,677       57,540       61,645       66,076       70,376           217,358               526,672
    OT....................................................       37,227       40,141       43,373       46,627       50,035       53,677       57,540       61,645       66,076       70,376           217,403               526,717
  Off-budget:
    BA....................................................      918,632      972,586    1,033,289    1,098,345    1,167,189    1,239,765    1,314,911    1,393,028    1,475,537    1,562,058         5,190,041            12,175,340
    OT....................................................      913,954      967,285    1,027,560    1,092,214    1,160,858    1,233,134    1,308,078    1,385,794    1,468,002    1,554,221         5,161,871            12,111,100
Veterans Benefits and Services (700):
  BA......................................................      174,766      173,539      187,777      194,202      200,763      217,151      214,690      211,449      229,055      236,447           931,047             2,039,839
  OT......................................................      182,047      174,275      187,312      193,407      199,856      216,047      213,505      210,297      227,790      235,210           936,897             2,039,746
Administration of Justice (750):
  BA......................................................       64,515       59,085       60,630       62,172       63,250       64,866       66,560       68,275       70,357       73,432           309,652               653,142
  OT......................................................       58,672       59,739       62,389       64,685       64,691       65,051       66,555       68,059       69,986       73,381           310,176               653,208
General Government (800):
  BA......................................................       23,367       22,293       22,087       21,924       21,758       23,680       23,932       24,183       24,426       24,620           111,429               232,269
  OT......................................................       22,749       21,650       21,516       21,629       21,565       23,221       23,647       23,924       24,177       24,391           109,109               228,469
Net Interest (900):
  On-budget:
    BA....................................................      393,678      446,615      499,334      540,201      569,849      594,309      620,683      638,813      648,404      655,665         2,449,676             5,607,550
    OT....................................................      393,678      446,615      499,334      540,201      569,849      594,309      620,683      638,813      648,404      655,665         2,449,676             5,607,550
  Off-Budget:
    BA....................................................      -87,204      -87,518      -88,743      -89,073      -88,311      -85,152      -81,796      -78,044      -72,494      -64,748          -440,850              -823,084
    OT....................................................      -87,204      -87,518      -88,743      -89,073      -88,311      -85,152      -81,796      -78,044      -72,494      -64,748          -440,850              -823,084
Allowances (920):
  BA......................................................      -39,520      -52,890      -54,216      -57,006      -59,733      -61,661      -63,814      -65,767      -67,933      -65,057          -263,365              -587,597
  OT......................................................      -20,821      -38,653      -48,261      -52,626      -56,411      -59,168      -61,148      -63,141      -65,208      -64,663          -216,772              -530,100
Government-Wide Savings (930):
  BA......................................................       34,478       32,662      -29,983      -37,042      -45,175     -115,840      -68,634      -13,285      -81,290     -131,037           -45,059              -455,145
  OT......................................................       14,610       46,700      -22,263      -29,889      -37,802     -107,032      -59,149       -3,260      -74,838     -113,780           -28,644              -386,702
Undistributed Offsetting Receipts (950):
  On-budget:
    BA....................................................      -88,561      -89,314      -81,278      -83,732      -87,842      -91,041      -99,201     -108,213     -114,167     -123,243          -430,727              -966,592
    OT....................................................      -88,561      -89,314      -81,278      -83,732      -87,842      -91,041      -99,201     -108,213     -117,567     -123,243          -430,727              -969,992
  Off-budget:
    BA....................................................      -16,922      -17,490      -18,069      -18,656      -19,260      -19,879      -20,510      -21,158      -21,826      -22,516           -90,397              -196,286
    OT....................................................      -16,922      -17,490      -18,069      -18,656      -19,260      -19,879      -20,510      -21,158      -21,826      -22,516           -90,397              -196,286
                                Overseas Contingency Operations/Global War on Terrorism (970):
  BA......................................................       73,693       26,666       26,666       26,666       26,666            0            0            0            0            0           180,357               180,357
  OT......................................................       38,485       27,762       25,573       25,592       25,598        8,884        3,240          776            0            0           143,010               155,910
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
 
1. Only on-budget amounts for fiscal years 2017-2026 are entered into the budget resolution legislative text. Off-budget amounts are shown for display purposes only.
2. The Office of Management and Budget and the Congressional Budget Office do not separately track outlays for Overseas Contingency Operations/Global War on Terrorism (GWOT) once funds have been appropriated. The budget, therefore,
  shows in function 970 OCO/GWOT outlays that result from new budget authority occurring in fiscal years 2017-2026 only. Outlays resulting from OCO/GWOT activity prior to fiscal year 2016 are included in budget functions 050 and
  150.



                                                                                   TABLE 2.--FISCAL YEAR 2017 BUDGET RESOLUTION DISCRETIONARY SPENDING
                                                                                                        [In millions of dollars]
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                        Fiscal year                             2017         2018         2019         2020         2021         2022         2023         2024         2025         2026            2017-2021             2017-2026
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                 SUMMARY
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total spending:
  BA......................................................    1,143,292    1,084,135    1,097,737    1,109,745    1,121,753    1,107,096    1,119,848    1,132,970    1,145,469    1,159,356         5,556,662            11,221,401
  OT......................................................    1,202,910    1,165,964    1,162,879    1,169,491    1,171,186    1,157,678    1,154,217    1,157,300    1,172,936    1,184,229         5,872,430            11,698,790
Base Defense (050):
  BA......................................................      551,068      585,469      599,071      611,079      623,087      635,096      647,848      660,970      673,469      687,356         2,969,774             6,274,513
  OT......................................................      557,743      565,121      583,345      596,062      607,911      624,797      632,317      640,020      657,296      670,488         2,910,183             6,135,101
Base Non Defense:
  BA......................................................      518,531      472,000      472,000      472,000      472,000      472,000      472,000      472,000      472,000      472,000         2,406,531             4,766,531
  OT......................................................      606,682      573,081      553,961      547,836      537,677      523,997      518,660      516,505      515,640      513,740         2,819,237             5,407,778
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                               BY FUNCTION
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
National Defense (050):
  BA......................................................      551,068      585,469      599,071      611,079      623,087      635,096      647,848      660,970      673,469      687,356         2,969,774             6,274,513
  OT......................................................      557,743      565,121      583,345      596,062      607,911      624,797      632,317      640,020      657,296      670,488         2,910,183             6,135,101
International Affairs (150):
  BA......................................................       35,762       36,732       37,449       38,228       39,058       39,868       40,873       41,747       42,664       43,627           187,229               396,007
  OT......................................................       45,320       41,843       40,767       40,075       39,666       39,927       40,561       41,175       41,830       42,592           207,670               413,754
General Science, Space and Technology (250):
  BA......................................................       30,108       30,755       31,400       32,074       32,779       33,485       34,226       34,970       35,745       36,558           157,116               332,100
  OT......................................................       30,345       30,552       31,074       31,632       32,197       32,857       33,578       34,290       35,048       35,833           155,800               327,406
Energy (270):
  BA......................................................        2,739        2,816        2,880        2,947        3,017        3,086        3,159        3,231        3,309        3,388            14,399                30,572
  OT......................................................        3,101        2,922        2,913        2,972        3,029        3,086        3,149        3,220        3,293        3,370            14,937                31,055
Natural Resources & Environment (300):
  BA......................................................       36,118       37,078       38,081       39,108       40,189       41,263       42,390       43,555       44,748       46,001           190,574               408,531
  OT......................................................       38,039       38,304       38,796       39,601       40,445       41,459       42,508       43,068       44,195       44,969           195,185               411,384
Agriculture (350):
  BA......................................................        6,347        6,514        6,688        6,868        7,052        7,237        7,437        7,635        7,846        8,060            33,469                71,684
  OT......................................................        6,190        6,391        6,597        6,773        6,955        7,138        7,333        7,530        7,737        7,948            32,906                70,592
Commerce & Housing Credit (370):
  On-budget:
    BA....................................................      -12,590      -13,788      -14,999      -16,066      -16,795      -17,066      -17,120      -17,160      -17,196      -17,174           -74,238              -159,954
    OT....................................................      -11,971      -13,495      -15,017      -16,144      -16,865      -17,150      -17,214      -17,257      -17,300      -17,281           -73,492              -159,694
  Off-budget:
    BA....................................................          274          283          294          304          315          326          337          350          361          374             1,470                 3,218
    OT....................................................          273          283          294          304          315          325          337          349          360          373             1,469                 3,213
Transportation (400):
  BA......................................................       29,396       30,093       30,794       31,516       32,277       33,030       33,849       34,675       35,543       34,810           154,076               325,983
  OT......................................................       89,728       89,373       91,020       92,410       87,683       78,818       75,529       74,999       74,918       73,571           450,214               828,049
Community & Regional Development (450):
  BA......................................................        8,158        7,453        6,850        6,227        6,395        6,567        6,741        6,923        7,112        7,308            35,083                69,734
  OT......................................................       20,037       17,513       15,371       12,710       10,646        7,916        6,932        6,853        7,003        7,165            76,277               112,146
Education, Training, Employment, and Social Services
 (500):
  BA......................................................       86,622       95,111       97,058       98,925      100,599      102,355      104,088      105,789      107,587      108,872           478,315             1,007,006
  OT......................................................       93,668       93,784       95,483       97,323       99,033      100,751      102,457      104,146      105,870      107,471           479,291               999,986
Health (550):
  BA......................................................       59,727       61,176       61,837       62,557       63,146       63,765       64,369       64,924       65,270       65,794           308,443               632,565
  OT......................................................       59,606       60,560       60,583       61,267       61,640       62,127       62,600       63,086       63,365       63,822           303,656               618,656
Medicare (570):
  BA......................................................        6,549        6,898        7,263        7,651        8,055        8,482        8,920        9,376        9,846       10,345            36,416                83,385
  OT......................................................        6,581        6,876        7,202        7,587        7,987        8,411        8,847        9,300        9,769       10,262            36,233                82,822
Income Security (600):
  BA......................................................       65,510       66,441       67,571       68,812       69,753       71,233       72,765       74,338       75,929       77,577           338,087               709,929
  OT......................................................       66,595       67,149       67,843       68,675       69,453       70,653       71,929       73,446       75,000       76,613           339,715               707,356
 
Social Security (650):
  On-budget:
    BA....................................................            0            0            0            0            0            0            0            0            0            0                 0                     0
    OT....................................................           28           17            0            0            0            0            0            0            0            0                45                    45
  Off-budget:
    BA....................................................        5,362        5,522        5,688        5,862        6,039        6,219        6,406        6,600        6,800        7,009            28,473                61,507
    OT....................................................        5,384        5,521        5,659        5,831        6,008        6,188        6,373        6,566        6,765        6,972            28,403                61,267
Veterans Benefits and Services (700):
  BA......................................................       74,734       76,948       79,236       81,585       84,012       86,483       89,048       91,700       94,450       97,325           396,515               855,521
  OT......................................................       74,697       76,125       78,554       80,702       83,090       85,506       88,008       90,661       93,346       96,211           393,168               846,900
Administration of Justice (750):
  BA......................................................       55,032       56,471       58,195       59,973       61,811       63,671       65,619       67,618       69,703       72,051           291,482               630,144
  OT......................................................       54,916       56,291       57,905       59,624       61,319       63,151       65,090       67,072       69,137       71,129           290,055               625,634
General Government (800):
  BA......................................................       15,733       14,822       14,480       14,261       13,957       15,788       16,010       16,196       16,353       16,492            73,253               154,091
  OT......................................................       15,190       14,355       14,029       14,047       13,832       15,376       15,750       15,981       16,159       16,324            71,453               151,043
Allowances (920):
  BA......................................................      -33,561      -51,173      -52,103      -54,580      -58,171      -59,731      -61,840      -63,748      -65,966      -67,034          -249,588              -567,907
  OT......................................................      -17,687      -37,171      -46,170      -50,454      -54,639      -57,290      -59,315      -61,286      -63,379      -64,903          -206,121              -512,294
Government-Wide Savings (930):
  BA......................................................       46,511        1,849       -6,662      -14,252      -21,489      -34,061      -45,277      -56,719      -68,103      -79,383             5,958              -277,585
  OT......................................................       26,643       15,887        1,058       -7,099      -14,116      -25,253      -35,792      -46,694      -57,477      -68,700            22,373              -211,542
                                Overseas Contingency Operations/Global War on Terrorism (970):
  BA......................................................       73,693       26,666       26,666       26,666       26,666            0            0            0            0            0           180,357               180,357
  OT......................................................       38,485       27,762       25,573       25,592       25,598        8,884        3,240          776            0            0           143,010               155,910
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


                                                                                     TABLE 3.--FISCAL YEAR 2017 BUDGET RESOLUTION MANDATORY SPENDING
                                                                                                        [In millions of dollars]
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                         Fiscal year                             2017        2018         2019         2020         2021         2022         2023         2024         2025         2026            2017-2021             2017-2026
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                 SUMMARY
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total spending:
  BA........................................................   2,757,675   2,763,986    2,909,629    3,069,810    3,187,884    3,342,301    3,531,686    3,706,973    3,855,063    4,014,199        14,688,984            33,139,205
  OT........................................................   2,679,551   2,683,378    2,825,647    2,993,979    3,129,950    3,287,707    3,467,617    3,634,098    3,774,346    3,952,116        14,312,505            32,428,388
  On-budget:
    BA......................................................   1,948,676   1,905,686    1,992,796    2,089,385    2,139,012    2,218,733    2,330,674    2,425,184    2,486,343    2,552,489        10,075,554            22,088,977
    OT......................................................   1,875,175   1,830,349    1,914,499    2,019,644    2,087,373    2,170,734    2,273,400    2,359,504    2,413,120    2,498,200         9,727,039            21,441,997
  Off-budget:
    BA......................................................     808,999     858,300      916,833      980,426    1,048,872    1,123,568    1,201,012    1,281,789    1,368,721    1,461,710         4,613,429            11,050,229
    OT......................................................     804,376     853,029      911,148      974,336    1,042,577    1,116,973    1,194,217    1,274,594    1,361,227    1,453,916         4,585,465            10,986,392
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                               BY FUNCTION
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
National Defense (050):
  BA........................................................       8,186       8,290        8,482        8,682        8,904        9,097        9,253        9,455        9,694       10,758            42,544                90,801
  OT........................................................       8,718       8,928        9,097        9,076        9,177        9,247        9,318        9,481        9,720       10,728            44,996                93,490
International Affairs (150):
  BA........................................................       4,018       3,046        2,328          624         -332          -84          -68          -53          -42          -31             9,684                 9,406
  OT........................................................      -1,615      -1,583       -1,494       -1,245       -1,262       -1,034       -1,055       -1,073       -1,095       -1,119            -7,199               -12,575
General Science, Space and Technology (250):
  BA........................................................         107         100          100          100          100          100          100          100          100          100               507                 1,007
  OT........................................................         106         102          100          100          100          100          100          100          100          100               508                 1,008
Energy (270):
  BA........................................................      -5,653      -1,215       -1,205       -1,264       -1,270       -1,270       -1,271       -1,272       -1,280       -3,577           -10,607               -19,277
  OT........................................................      -1,659      -1,803       -1,674       -1,817       -1,865       -1,900       -1,931       -1,977       -2,030       -4,297            -8,818               -20,953
Natural Resources & Environment (300):
  BA........................................................       2,523       2,107        1,639        1,754          523          255          488          319           97       -1,975             8,546                 7,730
  OT........................................................       3,131       2,805        2,050        2,421          706          343          549          421          174       -1,910            11,113                10,690
Agriculture (350):
  BA........................................................      17,462      16,830       14,379       13,144       12,622       12,363       12,497       12,326       12,437       12,664            74,437               136,724
  OT........................................................      18,722      16,492       13,670       12,626       12,142       11,883       12,169       11,933       12,023       12,247            73,652               133,907
 
Commerce & Housing Credit (370):
  On-budget:
    BA......................................................       9,494       8,811        7,837        6,076        5,588        5,912        5,998        5,799        6,291        5,811            37,806                67,617
    OT......................................................      -5,806      -9,036       -6,718       -7,193       -8,583       -9,037      -11,067      -12,736      -12,826      -12,903           -37,336               -95,905
  Off-budget:
    BA......................................................        -145      -3,756       -3,956       -4,328       -4,707       -4,947       -5,187       -5,437       -5,696       -6,075           -16,892               -44,234
    OT......................................................         -68      -3,727       -3,941       -4,318       -4,702       -4,942       -5,182       -5,432       -5,690       -6,069           -16,756               -44,071
Transportation (400):
  BA........................................................      58,483      59,006       59,933       53,315       32,500       32,697       32,913       33,119       33,344       35,190           263,237               430,500
  OT........................................................         900         420           94         -273         -721       -1,127       -1,538       -1,958       -2,384       -1,191               420                -7,778
Community & Regional Development (450):
  BA........................................................        -597      -1,072       -1,129         -478         -580         -546         -491         -240        1,071        1,066            -3,856                -2,996
  OT........................................................         656         261          307          828          789        1,013        1,181           55        1,275        1,277             2,841                 7,642
Education, Training, Employment, and Social Services (500):
  BA........................................................      -7,827     -11,028      -11,607      -12,063      -12,497      -13,537      -10,598      -11,375      -12,111      -12,823           -55,022              -115,466
  OT........................................................      -1,671      -7,951       -9,405       -9,883      -10,276      -10,949       -9,957       -8,974       -9,377       -9,965           -39,186               -88,408
Health (550):
  BA........................................................     405,457     305,494      308,141      318,847      327,438      334,460      342,738      351,610      361,328      388,257         1,665,377             3,443,770
  OT........................................................     399,027     315,043      310,112      319,007      326,797      333,567      341,521      350,125      359,536      386,108         1,669,986             3,440,843
Medicare (570):
  BA........................................................     583,537     576,852      636,108      677,260      723,266      809,255      825,811      829,789      904,455      963,199         3,197,023             7,529,532
  OT........................................................     583,487     576,814      636,065      677,229      723,250      809,237      825,791      829,721      904,395      963,139         3,196,845             7,529,128
Income Security (600):
  BA........................................................     432,013     405,268      413,212      423,029      409,965      417,040      425,108      433,554      442,468      452,098         2,083,487             4,253,755
  OT........................................................     425,365     394,208      405,549      415,286      402,664      415,817      419,628      421,996      432,575      448,710         2,043,072             4,181,798
Social Security (650):
  On-budget:
    BA......................................................      37,199      40,124       43,373       46,627       50,035       53,677       57,540       61,645       66,076       70,376           217,358               526,672
    OT......................................................      37,199      40,124       43,373       46,627       50,035       53,677       57,540       61,645       66,076       70,376           217,358               526,672
  Off-budget:
    BA......................................................     913,270     967,064    1,027,601    1,092,483    1,161,150    1,233,546    1,308,505    1,386,428    1,468,737    1,555,049         5,161,568            12,113,833
    OT......................................................     908,570     961,764    1,021,901    1,086,383    1,154,850    1,226,946    1,301,705    1,379,228    1,461,237    1,547,249         5,133,468            12,049,833
Veterans Benefits and Services (700):
  BA........................................................     100,032      96,591      108,541      112,617      116,751      130,668      125,642      119,749      134,605      139,122           534,532             1,184,318
  OT........................................................     107,350      98,150      108,758      112,705      116,766      130,541      125,497      119,636      134,444      138,999           543,729             1,192,846
Administration of Justice (750):
  BA........................................................       9,483       2,614        2,435        2,199        1,439        1,195          941          657          654        1,381            18,170                22,998
  OT........................................................       3,756       3,448        4,484        5,061        3,372        1,900        1,465          987          849        2,252            20,121                27,574
General Government (800):
  BA........................................................       7,634       7,471        7,607        7,663        7,801        7,892        7,922        7,987        8,073        8,128            38,176                78,178
  OT........................................................       7,559       7,295        7,487        7,582        7,733        7,845        7,897        7,943        8,018        8,067            37,656                77,426
Net Interest (900):
  On-budget:
    BA......................................................     393,678     446,615      499,334      540,201      569,849      594,309      620,683      638,813      648,404      655,665         2,449,676             5,607,550
    OT......................................................     393,678     446,615      499,334      540,201      569,849      594,309      620,683      638,813      648,404      655,665         2,449,676             5,607,550
  Off-Budget:
    BA......................................................     -87,204     -87,518      -88,743      -89,073      -88,311      -85,152      -81,796      -78,044      -72,494      -64,748          -440,850              -823,084
    OT......................................................     -87,204     -87,518      -88,743      -89,073      -88,311      -85,152      -81,796      -78,044      -72,494      -64,748          -440,850              -823,084
Allowances (920):
  BA........................................................      -5,959      -1,717       -2,113       -2,426       -1,562       -1,930       -1,974       -2,019       -1,967        1,977           -13,777               -19,690
  OT........................................................      -3,134      -1,482       -2,091       -2,172       -1,772       -1,878       -1,833       -1,855       -1,829          240           -10,651               -17,806
Government-Wide Savings (930):
  BA........................................................     -12,033      30,813      -23,321      -22,790      -23,686      -81,779      -23,357       43,434      -13,187      -51,654           -51,017              -177,560
  OT........................................................     -12,033      30,813      -23,321      -22,790      -23,686      -81,779      -23,357       43,434      -17,361      -45,080           -51,017              -175,160
Undistributed Offsetting Receipts (950):
  On-budget:
    BA......................................................     -88,561     -89,314      -81,278      -83,732      -87,842      -91,041      -99,201     -108,213     -114,167     -123,243          -430,727              -966,592
    OT......................................................     -88,561     -89,314      -81,278      -83,732      -87,842      -91,041      -99,201     -108,213     -117,567     -123,243          -430,727              -969,992
  Off-budget:
    BA......................................................     -16,922     -17,490      -18,069      -18,656      -19,260      -19,879      -20,510      -21,158      -21,826      -22,516           -90,397              -196,286
    OT......................................................     -16,922     -17,490      -18,069      -18,656      -19,260      -19,879      -20,510      -21,158      -21,826      -22,516           -90,397              -196,286
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


                          COMPARISON WITH THE
                           PRESIDENT'S BUDGET

                              ----------                              

    To this day, more than four decades since the adoption of 
the Congressional Budget Act, some budget ``experts'' still 
describe the congressional budget as a ``response'' to the 
President's. That is true only in terms of timing. Merely as a 
carryover from a 1921 law, the 1974 Budget Act scheduled the 
President's submission before the congressional budget. The 
effect, however, has been more significant than most might 
think--largely because the sequence is taken for granted. Since 
the executive budget process was installed nearly a century 
ago, and increasingly since the 1950s, presidents have used 
this instrument not mainly as an accounting tool--showing the 
fiscal effects of executing existing policies--but as an 
expression of their own policy agenda. Over the course of 50 
years, the President's budget became an ever-more effective 
tool empowering one person to determine the Nation's 
direction--contrary to what the Constitution intended. It is no 
mere coincidence that the practice corresponded with the rise 
of what political historian Arthur M. Schlesinger termed ``the 
imperial presidency.''
    The Obama budgets provide an especially troubling example. 
This President has been notorious in exceeding his authority. 
He has made, for example, numerous legislative changes in his 
own health care program after he had signed it--clearly 
imposing on a prerogative reserved to the Congress. Reflecting 
his own cavalier attitude about fiscal policy, he has submitted 
his budgets late more often than not--including the latest one.
    Worse are the irresponsible policies his budgets continue 
to advance. His latest proposal, for fiscal year 2017, once 
again does not even try to balance. While the House budget 
reduces debt held by the public as a share of the economy, the 
President's budget maintains debt at its historically high 
levels. His budget makes no attempt to confront the 
government's massive fiscal challenges, or to save critical 
programs such as Medicare and Social Security. It is a status 
quo budget that does nothing to advance the conversation about 
maintaining a strong national defense, promoting a more robust 
economy, and ensuring health and retirement security. The 
President's budget expresses the progressive policies that have 
led to a swollen and out-of-control government, and the 
stagnation of economic growth and standards of living.
    For these reasons, the President's budget was not even 
worth the time for a hearing on it--at which the administration 
would presumably attempt to defend the indefensible. Yet to 
further detail its failures, a comparison between the House 
budget and the President's is informative. Here are some 
examples.

     LAs a foundation for the congressional budget, the 
Budget Committee uses the modest economic projections of the 
Congressional Budget Office [CBO], which expects real gross 
domestic product [GDP] to grow by an average of 2.1 percent per 
year over the next decade. For his budget, the President 
employs the more optimistic forecasts of his own economists, 
who expect average annual growth of 2.3 percent per year over 
the next decade. Both figures are disturbingly low, compared 
with the roughly 3-percent average annual growth rate of the 
past 50 years. In addition, the seemingly small difference 
between the two estimates has significant budgetary effects. 
Following a CBO ``rule of thumb,'' that two-tenths percentage 
point difference would give the President roughly $650 billion 
in lower deficits than the Budget Committee faced in writing 
this package. Yet he manages to increase deficits after he 
leaves office.

     LWhile the Committee has developed a plan to 
balance the budget within 10 years, the President's budget 
never balances. It never tries to. In fact, deficits under the 
President's budget begin to increase in 2021, and approach $800 
billion in 2026. This is the product of the President's casual 
attitude that deficits in the range of 3 percent of GDP are 
acceptable. This is not a fiscal policy; it is an abandonment 
of fiscal norms that leads to chronic and growing deficits and 
debt. Only by restoring the goal of balancing the budget in 
peacetime can Congress establish fiscal sustainability. No 
other standard has substituted for this simple conviction. As a 
result, fiscal policy has been adrift.

    FIGURE 5
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


      The House budget resolution reduces spending by 
$6.5 trillion over 10 years compared with current policy 
projections. The President, even in the face of historically 
high levels of debt, increases spending by $2.5 trillion over 
the decade.

      The House budget embraces tax reform that will 
promote growth and encourage work, saving, and investment, and 
it contains no tax increases. The President, by contrast, 
raises taxes by $3.4 trillion over the next decade--and still 
cannot reduce deficits.

      The House budget reduces publicly held debt from 
74 percent of GDP to 57 percent over the decade. The 
President's budget makes no attempt to reduce debt, keeping it 
constant at 74 percent of GDP over the next 10 years. That is 
the highest level of debt since just after World War II. A 
significant difference, however, is that the post-war debt 
resulted from large but temporary surges of spending to save 
the free world. Today's deficits and debt are the product of 
permanent automatic spending programs.

    FIGURE 6
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


      The House budget restores the time-tested 
principle of federalism, encouraging the initiative of State 
and local governments in addressing more of the Nation's 
domestic policy concerns. The President's budget merely repeats 
the failed and crippling notion that Washington knows best, 
directing how individuals should live their lives, how State 
and local governments should govern, and how businesses should 
serve their customers.

      The House budget advances patient-centered, 
personalized health care and health coverage--and this 
principle applies both to commercial insurance and major 
government-sponsored programs such as Medicare. The Obama 
budget predictably clings to the conceit of centralized, 
Washington-based, one-size-fits-all health care--even as its 
failure becomes ever clearer.

      The House budget saves $487 billion over 10 years 
by strengthening Medicare and establishing a patient-centered 
option in Medicare. It achieves another $3 trillion in health 
savings, by repealing Obamacare and allowing greater State 
flexibility in Medicaid. The budget saves $1.5 trillion in 
other automatic spending. The President, by contrast, traps 
increasing numbers of lower income people in Medicaid, where 
many sick individuals cannot get appointments, new 
beneficiaries cannot find doctors, and Medicaid cards are mere 
pieces of plastic. His health care law will increase Federal 
spending for Medicaid and the State Children's Health Insurance 
Program by $1 trillion over the next 10 years, with no 
substantial reforms to improve the program. Meanwhile, he 
imposes $501 billion in new Medicare cuts to medical 
providers--part of the cuts needed to finance Obamacare, at 
least on paper--with no meaningful restructuring of a program 
going bankrupt.

      The House budget provides more resources for 
national security than the President does in fiscal year 2017 
and over 10 years. The President claims illusory defense 
spending increases with no plan to pay for adjusting statutory 
defense spending caps upward.

    The President's budget is a typically unserious set of 
proposals that should nevertheless be taken seriously. It 
expresses and leads a progressive impulse heavy on spending, 
regulation, and debt--one that ultimately views the Nation as 
the government's servant, not the other way around. This 
comparison reflects some of the dangerous and self-defeating 
flaws in that vision.

                               HOUSE BUDGET RESOLUTION VS. THE PRESIDENT'S BUDGET
----------------------------------------------------------------------------------------------------------------
               House Budget Resolution                                    President's Budget
----------------------------------------------------------------------------------------------------------------
Uses modest economic growth projections of the        Relies on more optimistic economic assumptions of White
 Congressional Budget Office.                          House forecasters.
----------------------------------------------------------------------------------------------------------------
Achieves balance within 10 years.                     Never balances; deficits climb starting in 2021 and
                                                       approach $800 billion by the end of the decade.
----------------------------------------------------------------------------------------------------------------
Reduces spending by $6.5 trillion over 10 years.      Spends $2.5 trillion more than the House budget over 10
                                                       years.
----------------------------------------------------------------------------------------------------------------
Calls for growth-promoting tax reform that reduces    Increases taxes by $3.4 trillion over 10 years.
 rates and broadens the tax base. Contains no tax
 increases.
----------------------------------------------------------------------------------------------------------------
Reduces debt held by the public from the current 74   Keeps publically held debt at about three-fourths of
 percent of gross domestic product [GDP] to 57         economic output--the highest level since just after World
 percent within 10 years.                              War II.
----------------------------------------------------------------------------------------------------------------
Restores the principle of federalism, encouraging     Advances the failed notion that Washington knows best,
 the initiative of State and local governments in      dictating how individuals should live, how State and
 addressing more of the Nation's domestic policy       local governments should serve constituents, and how
 concerns.                                             businesses should serve their customers.
----------------------------------------------------------------------------------------------------------------
Promotes patient-centered, personalized health care   Maintains the conceit of centralized, Washington-based,
 both in the private sector and in Medicare.           one-size-fits-all health care.
----------------------------------------------------------------------------------------------------------------
Saves $487 billion over 10 years by strengthening     Increases Federal Medicaid and State Children's Health
 Medicare and establishing a patient-centered          Insurance Program spending by more than $1 trillion over
 Medicare option. Achieves another $3.0 trillion in    10 years due to the President's health care law, with no
 health savings, partly by repealing Obamacare and     substantial reforms to improve the program. Imposes $501
 allowing greater State flexibility in Medicaid.       billion (gross) in new Medicare cuts to hospitals and
 Saves another $1.5 trillion in other direct           skilled nursing facilities, while ignoring the
 spending.                                             fundamental structural flaws in the program.
----------------------------------------------------------------------------------------------------------------
Spends more than the President for national defense   Claims illusory defense spending increases with no plan to
 in fiscal year 2017 and over 10 years.                pay for raising statutory defense spending caps.
----------------------------------------------------------------------------------------------------------------


                                                 TABLE 4.--SUMMARY OF FISCAL YEAR 2017 BUDGET RESOLUTION
                                                                [As a percentage of GDP]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                Average
                                             2017      2018      2019      2020      2021      2022      2023      2024      2025      2026    2017-2026
--------------------------------------------------------------------------------------------------------------------------------------------------------
Deficit(+)/Surplus(-):
  Committee Recommendation...............     +2.0%     +1.0%     +1.0%     +0.9%     +0.8%     +0.6%     +0.5%     +0.3%     +0.1%     -0.1%      +0.7%
  CBO....................................     +2.9%     +2.8%     +3.5%     +3.7%     +4.0%     +4.4%     +4.4%     +4.3%     +4.6%     +4.9%      +4.0%
  President's Budget.....................     +2.6%     +2.3%     +2.6%     +2.4%     +2.4%     +2.8%     +2.7%     +2.5%     +2.7%     +2.8%      +2.6%
Debt Held by the Public:
  Committee Recommendation...............     75.0%     74.0%     72.0%     70.0%     68.0%     66.0%     64.0%     62.0%     59.0%     57.0%       n.a.
  CBO....................................     75.7%     75.7%     76.7%     77.8%     78.8%     80.3%     81.7%     82.8%     84.3%     86.1%       n.a.
  President's Budget.....................     76.5%     76.1%     76.1%     75.8%     75.5%     75.5%     75.4%     75.2%     75.2%     75.3%       n.a.
Outlays:
  Committee Recommendation...............     20.2%     19.3%     19.2%     19.2%     18.9%     18.8%     18.7%     18.6%     18.5%     18.3%      19.0%
  CBO....................................     21.1%     20.9%     21.5%     21.8%     22.0%     22.5%     22.4%     22.3%     22.8%     23.1%      22.0%
  President's Budget.....................     21.5%     21.6%     22.1%     22.3%     22.4%     22.7%     22.6%     22.4%     22.7%     22.8%      21.6%
Revenues:
  Committee Recommendation...............     18.3%     18.4%     18.2%     18.2%     18.1%     18.2%     18.1%     18.1%     18.1%     18.1%      18.2%
  CBO....................................     18.2%     18.1%     17.9%     18.0%     18.0%     18.0%     18.0%     18.1%     18.1%     18.2%      18.1%
  President's Budget.....................     18.9%     19.4%     19.5%     19.8%     20.0%     19.9%     19.9%     19.9%     20.0%     20.0%      19.7%
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                                                              TABLE 5.--FISCAL YEAR 2017 HOUSE BUDGET RESOLUTION VS. THE PRESIDENT'S BUDGET
                                                                                                        [In millions of dollars]
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                   Fiscal year                        2017          2018          2019          2020          2021          2022          2023          2024          2025          2026             2017-2021             2017-2026
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                 SUMMARY
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total spending:
  BA............................................     3,900,967     3,848,121     4,007,366     4,179,555     4,309,637     4,449,397     4,651,534     4,839,943     5,000,532     5,173,555        20,245,646            44,360,606
  OT............................................     3,882,461     3,849,342     3,988,526     4,163,470     4,301,136     4,445,385     4,621,834     4,791,398     4,947,282     5,136,345        20,184,934            44,127,178
On-budget:
  BA............................................     3,086,332     2,984,016     3,084,551     3,192,964     3,254,411     3,319,284     3,443,779     3,551,204     3,624,651     3,704,462        15,602,273            33,245,653
  OT............................................     3,072,428     2,990,509     3,071,424     3,182,999     3,252,237     3,321,899     3,420,907     3,509,889     3,578,931     3,675,084        15,569,597            33,076,306
Off-budget:
  BA............................................       814,635       864,105       922,815       986,592     1,055,226     1,130,113     1,207,755     1,288,739     1,375,882     1,469,093         4,643,372            11,114,954
  OT............................................       810,033       858,833       917,101       980,471     1,048,900     1,123,486     1,200,927     1,281,509     1,368,352     1,461,261         4,615,337            11,050,872
Revenues:
  Total.........................................     3,521,497     3,659,353     3,789,990     3,958,001     4,117,566     4,285,579     4,464,033     4,653,472     4,859,831     5,075,638        19,046,407            42,384,960
  On-budget.....................................     2,692,937     2,799,875     2,902,418     3,040,763     3,168,226     3,301,656     3,443,940     3,595,338     3,762,041     3,936,429        14,604,219            32,643,623
  Off-budget....................................       828,560       859,478       887,572       917,238       949,340       983,923     1,020,093     1,058,134     1,097,790     1,139,209         4,442,188             9,741,337
Surplus/Deficit(-):
  Total.........................................      -381,672      -198,531      -207,457      -194,777      -181,008      -141,019      -122,876       -76,487       -26,040        28,731        -1,163,444            -1,501,134
    Macroeconomic Fiscal Impact.................       -20,709        -8,542        -8,921        10,692         2,562        18,787        34,925        61,439        61,411        89,438           -24,917               241,084
    On-budget...................................      -379,491      -190,634      -169,006      -142,236       -84,011       -20,243        23,033        85,449       183,110       261,345          -965,378              -432,683
    Off-budget..................................        18,527           645       -29,529       -63,233       -99,560      -139,563      -180,834      -223,375      -270,562      -322,052          -173,149            -1,309,535
Debt Held by the Public (end of year)...........    14,400,000    14,726,000    14,976,000    15,190,000    15,436,000    15,576,000    15,808,000    15,934,000    15,812,000    15,960,000              n.a.                  n.a.
Debt Subject to Limit (end of year).............    19,848,354    20,314,389    20,647,523    20,904,600    21,161,285    21,296,902    21,510,772    21,598,523    21,373,459    21,412,056              n.a.                  n.a.
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                 PRESIDENT'S FY2017 BUDGET AS SUBMITTED
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total Spending:
  BA............................................     4,234,877     4,374,189     4,674,166     4,933,090     5,178,555     5,459,300     5,691,832     5,911,899     6,225,061     6,529,224        23,394,877            53,212,193
  OT............................................     4,147,224     4,352,222     4,644,309     4,879,818     5,124,248     5,415,425     5,625,782     5,826,653     6,151,854     6,462,436        23,147,821            52,629,971
On-budget:
  BA............................................     3,403,270     3,484,403     3,725,153     3,917,538     4,099,023     4,308,739     4,463,956     4,604,220     4,834,174     5,052,751        18,629,387            41,893,227
  OT............................................     3,318,636     3,467,898     3,702,365     3,871,656     4,052,084     4,272,745     4,406,330     4,527,678     4,769,921     4,995,241        18,412,639            41,384,554
Off-budget:
  BA............................................       831,607       889,786       949,013     1,015,552     1,079,532     1,150,561     1,227,876     1,307,679     1,390,887     1,476,473         4,765,490            11,318,966
  OT............................................       828,588       884,324       941,944     1,008,162     1,072,164     1,142,680     1,219,452     1,298,975     1,381,933     1,467,195         4,735,182            11,245,417
Revenues:
  Total.........................................     3,643,742     3,898,625     4,095,054     4,345,701     4,571,990     4,755,848     4,948,853     5,176,519     5,411,188     5,669,299        20,555,112            46,516,819
  On-budget.....................................     2,816,842     3,035,325     3,196,854     3,413,801     3,591,790     3,728,348     3,876,853     4,053,019     4,237,888     4,436,899        16,054,612            36,387,619
  Off-budget....................................       826,900       863,300       898,200       931,900       980,200     1,027,500     1,072,000     1,123,500     1,173,300     1,232,400         4,500,500            10,129,200
Surplus/Deficit(-):
  Total.........................................      -503,482      -453,597      -549,255      -534,117      -552,258      -659,577      -676,929      -650,134      -740,666      -793,137        -2,592,709            -6,113,152
  On-budget.....................................      -501,794      -432,573      -505,511      -457,855      -460,294      -544,397      -529,477      -474,659      -532,033      -558,342        -2,358,027            -4,996,935
  Off-budget....................................        -1,688       -21,024       -43,744       -76,262       -91,964      -115,180      -147,452      -175,475      -208,633      -234,795          -234,682            -1,116,217
Debt Held by the Public (end of year)...........    14,763,197    15,323,508    15,982,242    16,614,892    17,263,523    18,016,476    18,793,499    19,548,109    20,395,652    21,301,880              n.a.                  n.a.
Debt Subject to Limit (end of year).............    20,143,189    20,879,678    21,693,743    22,447,564    23,201,455    24,004,097    24,839,340    25,679,835    26,541,534    27,438,173              n.a.                  n.a.
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                            FY2017 HOUSE BUDGET VS. FY2017 PRESIDENT'S BUDGET
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total Spending:
  BA............................................      -333,910      -526,068      -666,800      -753,535      -868,918    -1,009,903    -1,040,298    -1,071,956    -1,224,529    -1,355,669        -3,149,231            -8,851,587
  OT............................................      -264,763      -502,880      -655,783      -716,348      -823,112      -970,040    -1,003,948    -1,035,255    -1,204,572    -1,326,091        -2,962,887            -8,502,793
On-budget:
  BA............................................      -316,938      -500,387      -640,602      -724,574      -844,612      -989,455    -1,020,177    -1,053,016    -1,209,523    -1,348,289        -3,027,114            -8,647,574
  OT............................................      -246,208      -477,389      -630,941      -688,657      -799,847      -950,846      -985,423    -1,017,789    -1,190,990    -1,320,157        -2,843,042            -8,308,248
Off-budget:
  BA............................................       -16,972       -25,681       -26,198       -28,960       -24,306       -20,448       -20,121       -18,940       -15,005        -7,380          -122,118              -204,012
  OT............................................       -18,555       -25,491       -24,843       -27,691       -23,264       -19,194       -18,525       -17,466       -13,581        -5,934          -119,845              -194,545
Revenues:
  Total.........................................      -122,245      -239,272      -305,064      -387,700      -454,424      -470,269      -484,820      -523,047      -551,357      -593,661        -1,508,705            -4,131,859
  On-budget.....................................      -123,905      -235,450      -294,436      -373,038      -423,564      -426,692      -432,913      -457,681      -475,847      -500,470        -1,450,393            -3,743,996
  Off-budget....................................         1,660        -3,822       -10,628       -14,662       -30,860       -43,577       -51,907       -65,366       -75,510       -93,191           -58,312              -387,863
Surplus/Deficit(-):
  Total.........................................      -121,810      -255,066      -341,798      -339,340      -371,250      -518,558      -554,053      -573,647      -714,626      -821,868        -1,429,265            -4,612,018
    Macroeconomic Fiscal Impact.................        20,709         8,542         8,921       -10,692        -2,562       -18,787       -34,925       -61,439       -61,411       -89,438            24,917              -241,084
    On-budget...................................      -122,303      -241,939      -336,505      -315,619      -376,283      -524,154      -552,510      -560,108      -715,143      -819,687        -1,392,649            -4,564,252
    Off-budget..................................       -20,215       -21,669       -14,215       -13,029         7,596        24,383        33,382        47,900        61,929        87,257           -61,533               193,318
Debt Held by the Public (end of year)...........      -363,197      -597,508    -1,006,242    -1,424,892    -1,827,523    -2,440,476    -2,985,499    -3,614,109    -4,583,652    -5,341,880              n.a.                  n.a.
Debt Subject to Limit (end of year).............      -294,835      -565,290    -1,046,220    -1,542,964    -2,040,170    -2,707,195    -3,328,568    -4,081,312    -5,168,075    -6,026,118              n.a.                  n.a.
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


                  THE ECONOMY AND ECONOMIC ASSUMPTIONS

                              ----------                              


                           An Anemic Recovery

    The economy is still languishing in the weakest recovery of 
the modern era and the expansionist government policies of the 
current administration are among the factors weighing on 
growth.
    The U.S. economy technically emerged from recession nearly 
7 years ago, but the subsequent recovery has been subpar. Since 
2010, real growth in gross domestic product [GDP] has averaged 
only slightly better than 2.0 percent annually, well below the 
3.0 percent historical trend rate of growth in the U.S.
    This trend of prolonged anemic growth has surprised most 
economic forecasters. Back in 2010, the Congressional Budget 
Office [CBO] expected real GDP to grow by a relatively brisk 
3.0 percent annual average over the 10-year budget window. By 
2014, that average slipped to 2.5 percent. In CBO's latest 
economic forecast, expected average real GDP growth fell to 
just 2.1 percent (see Figure 7). CBO has significantly lowered 
its expectation of long-term growth in potential GDP as well, 
due mainly to negative developments in the labor market. CBO 
expects slower growth in the potential labor force later this 
decade, which is linked to the aging of the population and the 
retirement of the baby-boom generation. With a smaller labor 
force, there will also be less business investment and slower 
growth in the country's capital stock. This ``new normal''--if 
that is what it is--is especially troubling because without 
more robust growth the economy will struggle to support the 80 
million retirees expected over the next couple decades, as well 
as the working age population. Standards of living will suffer, 
especially for middle-income earners.
    The President's policies also play a role in this trend. 
The heavy spending promoted by the current administration 
drains economic resources that otherwise would be available for 
growth-producing activities. In addition, the sharp increase in 
government debt--which now stands at near-record post-World War 
II levels--will crowd out additional capital investment in the 
long term. Meanwhile, CBO projects the Affordable Care Act--the 
President's nationalized health program--will create incentives 
for people to work fewer hours over the medium and longer term. 
The overall picture that CBO's latest economic forecast paints 
is that sluggish economic growth has evolved from mainly a 
cyclical issue to a longer-term structural problem. The clear 
downward trend in the economic forecast in recent years has 
raised the hurdle significantly for those trying to correct the 
fiscal imbalance over the next decade. This is important 
because CBO's annual economic assumptions are adopted for the 
budget resolution. As discussed in the next section, however, a 
meaningful change in fiscal policy can repay in stronger 
economic growth and budgetary dividends.

    FIGURE 7
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                   The Benefits of a Stronger Economy

    A stronger economy would provide a number of tangible 
benefits for the average American. Back in the latter part of 
the 1990s, real GDP was growing at a rate of about 4.5 
percent--roughly twice the rate of growth today. From 1995 to 
1999, real median household income grew by $5,000, nearly 10 
percent. Not coincidentally, this was a time when the Federal 
budget achieved a string of surpluses. In contrast, fiscal 
policy today features large deficits combined with a 
historically large stock of government debt--and real median 
income has fallen $3,700, or 6.5 percent, over the past 7 
years.
    A robust labor market also fosters more opportunity and 
upward mobility. Currently, 6 million Americans are working 
part-time due to poor business conditions or because that was 
the only employment option available. In the latter part of the 
1990s roughly half as many Americans faced this problem. A 
stronger economy also naturally alleviates poverty. By the year 
2000, after multiple years of robust economic growth, the rate 
of poverty in the U.S. had declined to a 25-year low. A more 
robust economy also provides more resources to the government 
to maintain a strong safety net.
    Achieving a stronger rate of growth requires the right 
economic policies. This is the central theme of remarks 
delivered in January at the annual meeting of the American 
Economic Association by Stanford University economist John B. 
Taylor.\25\ According to Taylor, key policies needed to bolster 
growth include fundamental tax reform to lower tax rates on 
people and businesses and thus reduce disincentives to work and 
invest; regulatory reforms to scale back and prevent 
regulations, such as Dodd-Frank, that fail cost-benefit tests 
and hamper economic growth; and entitlement reforms to prevent 
a debt explosion and improve incentives. The Congressional 
Budget Office has also concluded that putting the Federal 
budget on a path to balance is essential to creating more 
economic growth and greater prosperity. CBO finds that a 
significant deficit reduction package of $4 trillion would lead 
to growth in real output per capita (a proxy for a country's 
standard of living) of about 5 percent (about $4,000 per 
person) by 2040 compared to the current law trajectory.\26\
---------------------------------------------------------------------------
    \25\John B. Taylor, ``Can We Restart the Recovery All Over Again?'' 
presented at the 2016 annual meeting of the American Economic 
Association, January 2016.
    \26\Congressional Budget Office, The 2015 Long-Term Budget Outlook, 
16 June 2015.
---------------------------------------------------------------------------

                     The Current Economic Situation

    Economic output weakened sharply in the last quarter of 
2015, falling to just 1.0 percent real GDP growth on a 
seasonally adjusted, annualized basis. This weakness echoed how 
the year began--with quarterly growth of just 0.6 percent. For 
the year as a whole, real GDP grew by 2.4 percent (measured on 
a year-over-year basis) in 2015, unchanged from the growth rate 
posted in 2014. Since 2010, real GDP growth has averaged just 
more than 2.0 percent annually, well below the roughly 3.0-
percent historical trend rate of growth in the U.S. Sluggish 
economic growth has contributed to the government's fiscal 
problems. It leads to lower revenue levels than would otherwise 
occur while government spending (on welfare programs, for 
example) is higher. According to CBO, if real GDP growth is 
just 0.1 percentage point lower per year, the budget deficit 
will be higher by $327 billion over 10 years. Conversely, 
stronger economic growth would greatly improve the fiscal 
outlook.
    The pace of job growth appeared to be trending upward at 
the start of 2016. Nonfarm payroll employment increased by 
242,000 in February, compared to 172,000 in January and the 
229,000 average monthly increase posted in 2015. The 
unemployment rate ticked down to 4.9 percent in early 2016, the 
lowest rate in 8 years and down 0.8 percentage point from the 
rate at the start of 2015. The steady decline in the 
unemployment rate, however, masks less healthy underlying 
trends. When discouraged workers, marginally employed, and 
underemployed persons are counted, the unemployment rate is 
closer to 10 percent.\27\
---------------------------------------------------------------------------
    \27\Bureau of Labor Statistics, U-6 Index, Table A-15, March 2016.
---------------------------------------------------------------------------
    Although the overall trend of job gains has been solid of 
late, and the unemployment rate has continued to decline, other 
aspects of the labor market are not as robust. The labor force 
participation rate has increased in recent months, but still 
stands at just 62.9 percent, down roughly 3 percentage points 
since early 2009, and remains near its lowest level since 1978 
(See Figure 8). Long-term unemployment also remains a problem. 
Of the 7.8 million people who are currently unemployed, more 
than 2 million (28 percent) have been unemployed for more than 
6 months. Prior to the recession, only about 17 percent of the 
unemployed were out of work for that long. Long-term 
unemployment has genuinely corrosive consequences. For 
individuals, it erodes their job skills, further detaching them 
from employment opportunities. At the same time, it undermines 
the long-term productive capacity of the economy.

    FIGURE 8
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    In previous episodes when the unemployment rate was at or 
below 5.0 percent, the overall labor market was much healthier 
than it is today. For instance, about a decade ago, in 2005, 
the unemployment rate was trending lower and even dipped below 
5.0 percent. Yet the labor force participation rate was 66 
percent, more than 3 percentage points above the rate today. 
The number of people not in the labor force (or ``on the 
sidelines'') is currently 22 percent higher than the figure 
back in 2005. Similarly, the under-employment rate (which 
includes discouraged and marginally employed persons) is still 
quite elevated at close to 10 percent. A decade ago, that rate 
was about 8.5 percent. Also, more people today are working 
part-time because of poor business conditions or they can only 
find part-time work. Currently, 6 million Americans face this 
problem, whereas that figure was slightly more than 4 million 
in 2005.
    For most of the working population, wage gains have been 
subpar. Average hourly earnings of private-sector workers 
increased by 2.4 percent over the past year. Prior to the 
recession, average hourly earnings were tracking closer to 4 
percent. Likewise, average income levels have remained 
relatively flat in recent years. Real median household income 
declined by roughly $800 in 2014 (latest year available) to 
$53,657. That represents a sharp decline of 6.5 percent, or 
$3,700, since 2007.
    Oil prices have plunged over the past year and a half. 
Since mid-2014, crude oil prices have dropped from just above 
$100 per barrel to less than $30 per barrel early this year. 
Although lower oil prices are a net benefit for consumers (e.g. 
in lower gasoline prices), the price decline has hurt output 
and investment in the growing U.S. energy sector and has 
therefore weighed on the economy's overall growth rate.

    FIGURE 9
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    The sharp decline in oil prices has contributed to the 
downward slide in headline inflation rates. For instance, the 
price index for personal consumption expenditures [PCE] has 
increased by 1.3 percent over the latest 12 months. The so-
called core PCE index (which excludes energy and food prices), 
the Federal Reserve's preferred inflation gauge, has increased 
1.7 percent over the past year. That level of inflation remains 
below the Federal Open Market Committee's 2 percent objective 
for inflation over the longer run.
    After years of an extremely loose monetary policy stance, 
the Federal Reserve finally increased interest rates in 
December. The Fed had been holding interest rates near zero 
since the depths of the financial crisis in 2008. Looking 
ahead, the Fed has signaled that future rate increases will be 
``gradual.'' Despite the Fed's recent move, the yield on the 
10-year Treasury note has declined back below 2 percent in 
early 2016 from a recent peak of 2.4 percent in mid-2015.
    A portion of the fallback in Treasury rates, even as the 
Fed has begun to raise the Federal funds rate, is likely due to 
a ``flight to quality'' on the part of global investors as 
economic prospects outside the U.S. have soured and market 
volatility has increased significantly, particularly in China, 
the world's second largest economy.
    Many global central banks have signaled their intention to 
keep interest rates low and their overall monetary policy 
loose--in contrast to the Federal Reserve's disposition. This 
divergence in central bank policy stances on interest rates, as 
well as the differing economic outlook between the U.S. and the 
rest of the world, has caused the U.S. dollar to appreciate 
vis-a-vis other foreign currencies.
    The U.S. dollar has appreciated more than 11 percent on a 
trade-weighted basis since early 2015. The dollar's 
appreciation tends to dampen the competitiveness of U.S. 
exporters as their goods become more expensive for foreign 
consumers. A stronger dollar, and weaker global growth, has led 
to a fall in exports, a headwind for U.S. growth. Exports of 
U.S. goods and services are down 7 percent over the past 12 
months.
    Mirroring the recent trend in global financial markets, the 
U.S. stock market has experienced renewed volatility and has 
been trending lower in early 2016.

                          The Economic Outlook

    The administration's economic forecast is less hopeful than 
it was last year but it remains more upbeat than either CBO or 
the Blue Chip consensus of private-sector forecasters--who also 
are less optimistic than last year. The administration expects 
real GDP growth of 2.6 percent in calendar years 2016 and 2017, 
2.4 percent in 2018, and 2.3 percent in later years measured on 
a year-to-year basis. CBO--upon whose economic assumptions the 
budget resolution is based--expects real GDP to grow by 2.5 
percent in calendar year 2016, 2.6 percent in 2017, 2.2 percent 
in 2018 and stabilizing at 2.0 percent in 2023 and later years. 
CBO concedes its relatively weak near-term projections are 
somewhat more optimistic than other private and government 
forecasts: ``The economic projections in this report indicate a 
slightly stronger economy in the near term than do the Blue 
Chip consensus forecast (published in January) and the 
forecasts developed by the Federal Reserve (and presented at 
the Federal Open Market Committee's December 2015 
meeting).''\28\
---------------------------------------------------------------------------
    \28\Congressional Budget Office, The Budget and Economic Outlook: 
2016 to 2026, January 2016, p. 32.
---------------------------------------------------------------------------
    The Blue Chip consensus projects real GDP growth of 2.5 
percent in 2016 and also 2017, 2.4 percent in 2018, and 2.2 
percent in later years. Over the 10-year window of the budget 
resolution, the administration's Office of Management and 
Budget [OMB] expects real GDP growth to average 2.3 percent, 
modestly higher than Blue Chip and significantly higher than 
CBO which projects a 2.1 percent growth rate average over this 
period.
    Like other forecasters, the administration expects the 
unemployment rate to decline gradually in the coming years. 
According to OMB, the unemployment rate will average 4.7 
percent in 2016, decline to 4.5 percent in 2017, and rise to 
4.6 percent in 2018. The administration sees the unemployment 
rate rising very gradually in subsequent years before leveling 
off at 4.9 percent in 2023. (By comparison, the unemployment 
rate was 4.6 percent in 2007, the year before the financial 
crisis.) That path is similar in the near term but is more 
optimistic in the latter part of the window than the CBO 
forecast. CBO expects the unemployment rate to average 4.7 
percent in 2016 and decline to 4.4 percent in 2017, before 
rising to 4.6 percent in 2018, 4.8 percent in 2019 and leveling 
off at 5.0 percent in 2020. The Blue Chip consensus sees a 
near-term decline in the unemployment rate similar to both CBO 
and the administration, but is closer to CBO's forecast in the 
latter part of the window. According to Blue Chip, the 
unemployment rate will average 4.8 percent in 2016, decline to 
4.6 percent by 2017, and rise to 4.7 percent in 2018 and 
further in later years before leveling off at 5.0 percent in 
2022.
    The administration expects consumer price inflation, 
measured by the year-to-year percent change in the consumer 
price index, to rise to 1.5 percent in 2016 from 2015's 
unusually low level of 0.1 percent which reflected last year's 
sharp drop in oil prices. The administration expects price 
inflation of 2.1 percent in 2017 and 2.3 percent in 2021 and 
later years. CBO expects price inflation of 1.3 percent in 
2016, 2.3 percent in 2017 and 2.4 percent in 2018 and later 
years. The Blue Chip consensus expects inflation over the next 
two years that is similar to the administration's and CBO's 
forecasts. According to Blue Chip, price inflation will average 
1.6 percent in 2016, 2.3 percent in 2017, and 2.4 percent in 
2018 and 2019 before leveling off at 2.3 percent in later 
years.
    OMB expects interest rates will rise to more normal levels 
in the coming years. The 10-year Treasury note, which was about 
2.1 percent in 2015, is projected to rise to about 2.9 percent 
in 2016, 3.5 percent in 2017, and 3.9 percent in 2018. OMB 
expects the 10-year Treasury to hit 4.2 percent in 2020 and 
remain there in later years. CBO expects interest rates to rise 
to more normal levels as well but sees slightly lower rates 
than the administration for most years. CBO sees the 10-year 
Treasury averaging 2.8 percent in 2016, 3.5 percent in 2017, 
and 3.8 percent in 2018, and then stabilizing at 4.1 percent in 
2020 and later years. The Blue Chip consensus also sees a 
gradual increase in interest rates over the next two years but 
at lower levels than the administration. The Blue Chip 
consensus forecasts the 10-year Treasury note to average 2.6 
percent in 2016, 3.2 percent in 2017, 3.8 percent in 2018 and 
gradually rising further until stabilizing at 4.1 percent in 
2022 and later years.

                                      TABLE 6.--ECONOMIC PROJECTIONS: ADMINISTRATION, CBO, AND PRIVATE FORECASTERS
                                                                    [Calendar years]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       Estimated
                                                          2015     2016    2017    2018    2019    2020    2021    2022    2023    2024    2025    2026
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Year to Year, Percent Change
--------------------------------------------------------------------------------------------------------------------------------------------------------
Real GDP:
  Administration Budget..............................       2.4     2.6     2.6     2.4     2.3     2.3     2.3     2.3     2.3     2.3     2.3     2.3
  CBO (Jan. 2016)....................................       2.4     2.5     2.6     2.2     1.8     1.9     2.1     2.1     2.0     2.0     2.0     2.0
  Blue Chip (Oct. 2015 and Jan. 2016)................       2.5     2.5     2.5     2.4     2.2     2.2     2.2     2.2     2.2     2.2     2.2     2.2
Consumer Price Index:
  Administration Budget..............................       0.1     1.5     2.1     2.1     2.3     2.2     2.3     2.3     2.3     2.3     2.3     2.3
  CBO (Jan. 2016)....................................       0.1     1.3     2.3     2.4     2.4     2.4     2.4     2.4     2.4     2.4     2.4     2.4
  Blue Chip (Oct. 2015 and Jan. 2016)................       0.1     1.6     2.3     2.4     2.4     2.3     2.3     2.3     2.3     2.3     2.3     2.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Annual Average, Percent
--------------------------------------------------------------------------------------------------------------------------------------------------------
Unemployment Rate:
  Administration Budget..............................       5.3     4.7     4.5     4.6     4.6     4.7     4.7     4.8     4.9     4.9     4.9     4.9
  CBO (Jan. 2016)....................................       5.3     4.7     4.4     4.6     4.8     5.0     5.0     5.0     5.0     5.0     5.0     5.0
  Blue Chip (Oct. 2015 and Jan. 2016)................       5.3     4.8     4.6     4.7     4.7     4.8     4.9     5.0     5.0     5.0     5.0     5.0
3-Month Treasury Bill:
  Administration Budget..............................         *     0.7     1.8     2.6     3.1     3.3     3.4     3.4     3.3     3.3     3.2     3.2
  CBO (Jan. 2016)....................................       0.1     0.7     1.6     2.5     3.2     3.2     3.2     3.2     3.2     3.2     3.2     3.2
  Blue Chip (Oct. 2015 and Jan. 2016)................       0.1     0.7     1.7     2.8     3.1     3.1     3.1     3.1     3.1     3.1     3.1     3.1
10-Year Treasury Note:
  Administration Budget..............................       2.1     2.9     3.5     3.9     4.1     4.2     4.2     4.2     4.2     4.2     4.2     4.2
  CBO (Jan. 2016)....................................       2.1     2.8     3.5     3.8     4.0     4.1     4.1     4.1     4.1     4.1     4.1     4.1
  Blue Chip (Oct. 2015 and Jan. 2016)................       2.1     2.6     3.2     3.8     4.0     4.0     4.0     4.1     4.1     4.1     4.1     4.1
 
--------------------------------------------------------------------------------------------------------------------------------------------------------
*0.05 percent or less.
 
Sources: Congressional Budget Office, Office of Management and Budget, and Blue Chip Economic Indicators.


                                        TABLE 7.--ECONOMIC ASSUMPTIONS OF THE FISCAL YEAR 2017 BUDGET RESOLUTION
                                                                    [Calendar years]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   2016    2017    2018    2019    2020    2021    2022    2023    2024    2025    2026
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Year to Year, Percent Change
--------------------------------------------------------------------------------------------------------------------------------------------------------
Real GDP:
  CBO (Jan. 2016)...............................................    2.5     2.6     2.2     1.8     1.9     2.1     2.1     2.0     2.0     2.0     2.0
Consumer Price Index:
  CBO (Jan. 2016)...............................................    1.3     2.3     2.4     2.4     2.4     2.4     2.4     2.4     2.4     2.4     2.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Annual Average, Percent
--------------------------------------------------------------------------------------------------------------------------------------------------------
Unemployment Rate:
  CBO (Jan. 2016)...............................................    4.7     4.4     4.6     4.8     5.0     5.0     5.0     5.0     5.0     5.0     5.0
3-Month Treasury Bill:
  CBO (Jan. 2016)...............................................    0.7     1.6     2.5     3.2     3.2     3.2     3.2     3.2     3.2     3.2     3.2
10-Year Treasury Note:
  CBO (Jan. 2016)...............................................    2.8     3.5     3.8     4.0     4.1     4.1     4.1     4.1     4.1     4.1     4.1
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                    TABLE 8.--TAX EXPENDITURE ESTIMATES BY BUDGET FUNCTION, FISCAL YEARS 2015-2019\1\
                                                                  [Billions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Corporations                                 Individuals
                      Function                       ------------------------------------------------------------------------------------------   Total
                                                        2015     2016     2017     2018     2019     2015     2016     2017     2018     2019    2015-19
--------------------------------------------------------------------------------------------------------------------------------------------------------
National Defense:
  Exclusion of benefits and allowances to armed       .......  .......  .......  .......  .......      5.8      6.0      6.4      6.8      7.0      31.9
   forces personnel.................................
  Exclusion of military disability benefits.........  .......  .......  .......  .......  .......      0.3      0.3      0.3      0.3      0.3       1.4
  Deduction for overnight-travel expenses of          .......  .......  .......  .......  .......      0.1      0.1      0.1      0.1      0.1       0.5
   national guard and reserve members...............
  Exclusion of combat pay...........................  .......  .......  .......  .......  .......      1.4      1.4      1.5      1.6      1.6       7.5
International Affairs:
  Exclusion of certain allowances for Federal         .......  .......  .......  .......  .......      2.1      2.2      2.3      2.3      2.4      11.2
   employees abroad.................................
  Exclusion of foreign earned income:
    Housing.........................................  .......  .......  .......  .......  .......      1.3      1.3      1.4      1.5      1.6       7.1
    Salary..........................................  .......  .......  .......  .......  .......      6.4      6.7      7.2      7.6      8.0      35.7
  Inventory property sales source rule exception....      1.7      1.7      1.8      1.8      1.8  .......  .......  .......  .......  .......       8.8
  Deduction for foreign taxes instead of a credit...      0.3      0.3      0.3      0.3      0.3  .......  .......  .......  .......  .......       1.3
  Interest expense allocation:
    Unavailability of symmetric worldwide method*...     -1.2     -1.2     -1.2     -1.3     -1.3  .......  .......  .......  .......  .......      -6.2
    Separate grouping of affiliated financial             0.5      0.5      0.5      0.5      0.5  .......  .......  .......  .......  .......       2.5
     companies......................................
  Apportionment of research and development expenses      0.2      0.2      0.2      0.2      0.2  .......  .......  .......  .......  .......       1.1
   for determination of foreign tax credits.........
  Special rules for interest-charge domestic              0.6      0.6      0.6      0.7      0.7  .......  .......  .......  .......  .......       3.2
   international sales corporations.................
  Tonnage tax.......................................      0.1      0.1      0.1      0.1      0.1  .......  .......  .......  .......  .......       0.5
  Deferral of active income of controlled foreign        99.3    108.9    114.0    118.1    123.2  .......  .......  .......  .......  .......     563.6
   corporations.....................................
General Science, Space, and Technology:
  Expensing of research and experimental                  4.7      5.2      5.7      6.0      6.0      0.1      0.1      0.1      0.1      0.1      28.3
   expenditures.....................................
  Therapeutic research credit.......................      0.1      0.1      0.1  .......  .......      0.1      0.1      0.1  .......  .......       0.8
Energy:
  Credit for energy-efficient improvements to         .......  .......  .......  .......  .......      0.5  .......  .......  .......  .......       0.5
   existing homes...................................
  Credit for holders of clean renewable energy bonds    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)      0.1      0.1      0.1       0.6
   (Code sections 54 and 54C)\2,3\..................
  Exclusion of energy conservation subsidies          .......  .......  .......  .......  .......    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.1
   provided by public utilities.....................
  Credit for holders of qualified energy              .......  .......  .......  .......  .......    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.3
   conservation bonds\2,3\..........................
  Energy credit (section 48)........................      1.0      1.5      1.6      1.6      1.7      0.2      0.3      0.2      0.1      0.1       8.3
    Solar...........................................      0.9      1.4      1.5      1.5      1.6      0.1      0.2      0.2      0.1      0.1       7.7
    Geothermal......................................    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)     (\4\)
    Fuel Cells......................................    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)     (\4\)
    Microturbines...................................    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)     (\4\)
    Combined heat and power.........................    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)     (\4\)
    Small wind......................................    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)     (\4\)
    Geothermal heat pump systems....................    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)     (\4\)
  Credits for electricity production from renewable
   resources (section 45):
    Wind............................................      2.2      2.5      3.1      3.3      3.3      0.1      0.2      0.3      0.4      0.4      15.8
    Closed-loop biomass.............................    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.1
    Geothermal......................................    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.1
    Qualified hydropower............................    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.1
    Small irrigation power..........................    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.1
    Municipal solid waste...........................    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.4
    Open-loop biomass...............................      0.3      0.3      0.3      0.3      0.3    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       1.8
  Special rule to implement electric transmission        -0.2     -0.2     -0.2     -0.2     -0.2  .......  .......  .......  .......  .......      -1.0
   restructuring....................................
  Credits for investments in clean coal facilities..      0.2      0.2      0.2      0.2      0.2  .......  .......  .......  .......  .......       1.0
  Coal production credits:
    Refined coal....................................    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)  .......  .......  .......  .......  .......       0.1
    Indian coal.....................................    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)  .......  .......  .......  .......  .......       0.1
  Credits for alternative technology vehicles:
    Other alternative fuel vehicles.................    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)  .......  .......  .......  .......  .......       0.1
  Residential energy-efficient property credit......  .......  .......  .......  .......  .......      1.1      1.2      0.7  .......  .......       3.0
  Credit for plug-in electric vehicles..............    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)      0.2      0.2      0.2      0.2      0.2       1.2
  Credit for investment in advanced energy property.      0.2      0.2      0.2      0.1      0.1      0.1      0.1      0.1      0.1      0.1       1.2
  Exclusion of interest on State and local              (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.2
   government qualified private activity bonds for
   energy production facilities.....................
  Expensing of exploration and development costs,
   fuels:
    Oil and gas.....................................      1.0      1.1      1.1      1.1      1.0      0.3      0.4      0.3      0.3      0.3       7.0
    Other fuels.....................................    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.5
  Excess of percentage over cost depletion, fuels:
    Oil and gas.....................................      1.4      1.3      1.4      1.6      1.6    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       7.4
    Other fuels.....................................      0.2      0.2      0.3      0.3      0.3    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       1.4
  Amortization of geological and geophysical              0.1      0.1      0.1      0.1      0.1    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.7
   expenditures associated with oil and gas
   exploration......................................
  Amortization of air pollution control facilities..      0.4      0.4      0.3      0.3      0.3  .......  .......  .......  .......  .......       1.7
  Depreciation recovery periods for energy-specific
   items:
    5-year MACRS for certain energy property (solar,      0.3      0.3      0.3      0.2      0.2    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       1.3
     wind, etc.)....................................
    10-year MACRS for smart electric distribution         0.2      0.2      0.2      0.2      0.2  .......  .......  .......  .......  .......       1.0
     property.......................................
    15-year MACRS for certain electric transmission       0.2      0.2      0.2      0.2      0.2  .......  .......  .......  .......  .......       1.0
     property.......................................
    15-year MACRS for natural gas distribution line.      0.2      0.2      0.1      0.1      0.1  .......  .......  .......  .......  .......       0.8
  Exceptions for publicly traded partnership with     .......  .......  .......  .......  .......      1.1      1.2      1.2      1.2      1.2       5.9
   qualified income derived from certain energy-
   related activities...............................
Natural Resources and Environment:
  Special depreciation allowance for certain reuse      (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.1
   and recycling property...........................
  Expensing of exploration and development costs,         0.1      0.1      0.1      0.1      0.1    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.5
   nonfuel minerals.................................
  Excess of percentage over cost depletion, nonfuel       0.1      0.1      0.1      0.1      0.1    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.5
   minerals.........................................
  Expensing of timber-growing costs.................      0.3      0.3      0.3      0.3      0.3    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       1.5
  Special rules for mining reclamation reserves.....    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.2
  Special tax rate for nuclear decommissioning            0.2      0.2      0.3      0.3      0.3  .......  .......  .......  .......  .......       1.3
   reserve funds....................................
  Exclusion of contributions in aid of construction     (\4\)    (\4\)    (\4\)    (\4\)    (\4\)  .......  .......  .......  .......  .......       0.2
   for water and sewer utilities....................
  Exclusion of earnings of certain environmental        (\4\)    (\4\)    (\4\)    (\4\)    (\4\)  .......  .......  .......  .......  .......       0.1
   settlement funds.................................
  Amortization and expensing of reforestation             0.1      0.1      0.1      0.2      0.2      0.1      0.1      0.1      0.1      0.1       1.3
   expenditures.....................................
  Special tax rate for qualified timber gain          .......  .......  .......  .......  .......      0.3      0.3      0.4      0.4      0.4       1.8
   (including coal and iron ore)....................
  Treatment of income from exploration and mining of  .......  .......  .......  .......  .......      0.1      0.1      0.1      0.1      0.1       0.5
   natural resources as qualifying income under the
   publicly-traded partnership rules................
Agriculture:
  Expensing of soil and water conservation              (\4\)    (\4\)    (\4\)    (\4\)    (\4\)      0.1      0.1      0.1      0.1      0.1       0.6
   expenditures.....................................
  Expensing of the costs of raising dairy and           (\4\)    (\4\)    (\4\)    (\4\)    (\4\)      0.2      0.2      0.2      0.2      0.1       0.9
   breeding cattle..................................
  Exclusion of cost-sharing payments................    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.1
  Exclusion of cancellation of indebtedness income    .......  .......  .......  .......  .......      0.1      0.1      0.1      0.1      0.1       0.5
   of farmers.......................................
  Income averaging for farmers and fishermen........  .......  .......  .......  .......  .......      0.1      0.2      0.2      0.2      0.2       0.9
  5-year carryback period for net operating losses      (\4\)    (\4\)    (\4\)    (\4\)    (\4\)      0.1      0.1      0.1      0.1      0.1       0.4
   attributable to farming..........................
  Expensing by farmers for fertilizer and soil          (\4\)    (\4\)    (\4\)    (\4\)    (\4\)      0.1      0.2      0.2      0.2      0.2       0.9
   conditioner costs................................
  Cash accounting for agriculture...................    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.1
Commerce and Housing:
  Housing:
    Deduction for mortgage interest on owner-         .......  .......  .......  .......  .......     71.0     77.0     84.3     91.1     96.4     419.8
     occupied residences............................
    Deduction for property taxes on real property...  .......  .......  .......  .......  .......     32.4     34.7     36.9     39.2     41.3     184.5
    Exclusion of capital gains on sales of principal  .......  .......  .......  .......  .......     24.1     29.0     30.6     32.2     34.0     149.9
     residences.....................................
    Exclusion of interest on State and local              0.3      0.4      0.4      0.4      0.4      0.9      0.9      1.0      1.1      1.1       6.9
     government qualified private activity bonds for
     owner-occupied housing\5\......................
    Credit for low-income housing...................      7.3      7.8      8.3      8.6      9.2      0.3      0.3      0.4      0.4      0.4      43.0
    Credit for rehabilitation of historic structures      0.7      0.7      0.7      0.8      0.8      0.2      0.2      0.2      0.2      0.2       4.6
    Credit for rehabilitation of structures, other      (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)      0.1      0.1       0.3
     than historic structures.......................
    Exclusion of interest on State and local              0.3      0.3      0.3      0.3      0.3      0.7      0.7      0.8      0.8      0.9       5.4
     government qualified private activity bonds for
     rental housing.................................
    Depreciation of rental housing in excess of           0.5      0.4      0.4      0.4      0.4      4.2      4.0      3.9      3.9      3.8      22.0
     alternative depreciation system................
  Other business and commerce:
    Exclusion of interest on State and local              0.1      0.1      0.1      0.1      0.1      0.3      0.3      0.3      0.3      0.3       2.1
     government small-issue qualified private
     activity bonds.................................
    Carryover basis of capital gains on gifts.......  .......  .......  .......  .......  .......     -4.6     11.3     10.5      8.9      9.3      35.4
    Deferral of gain on non-dealer installment sales      6.9      6.8      6.7      6.7      6.7      2.1      1.7      1.4      1.2      1.2      41.3
    Deferral of gain on like-kind exchanges.........     11.0     11.1     11.4     11.7     12.2      5.8      5.9      6.0      6.2      6.4      87.7
    Expensing under section 179 of depreciable            4.8      1.8      0.8      0.8      0.6      7.8      2.9      1.3      1.2      1.0      22.9
     business property..............................
    Amortization of business startup costs..........    (\4\)    (\4\)    (\4\)    (\4\)      0.1    (\4\)    (\4\)    (\4\)      0.1      0.1       0.2
    Reduced rates on first $10,000,000 of corporate       4.0      4.2      4.2      4.2      4.2  .......  .......  .......  .......  .......      20.8
     taxable income.................................
    Exemptions from imputed interest rules..........    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)      0.6      0.6      0.7      0.7      0.7       3.4
    Expensing of magazine circulation expenditures..      0.1      0.1    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.1
    Special rules for magazine, paperback book, and     (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.2
     record returns.................................
    Completed contract rules........................      0.9      0.9      0.9      1.0      1.0      0.1      0.1      0.1      0.1      0.1       5.2
    Cash accounting, other than agriculture.........      0.3      0.3      0.3      0.3      0.3      1.8      1.9      1.9      2.0      2.0      11.1
    Credit for employer-paid FICA taxes on tips.....      0.6      0.6      0.6      0.7      0.7      0.7      0.7      0.7      0.8      0.8       6.9
    Deduction for income attributable to domestic        11.7     12.1     12.3     12.6     12.8      4.5      4.6      4.7      4.8      4.8      84.8
     production activities..........................
    Credit for the cost of carrying tax-paid            (\4\)    (\4\)    (\4\)    (\4\)    (\4\)  .......  .......  .......  .......  .......     (\4\)
     distilled spirits in wholesale inventories.....
    Reduced rates of tax on dividends and long-term   .......  .......  .......  .......  .......    131.7    134.6    137.1    140.9    145.4     689.6
     capital gains..................................
    Surtax on net investment income*................  .......  .......  .......  .......  .......    -34.8    -35.9    -36.9    -38.3    -40.0    -186.0
    Exclusion of capital gains at death.............  .......  .......  .......  .......  .......     32.4     32.9     33.8     35.2     36.8     171.3
    Expensing of costs to remove architectural and      (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.1
     transportation barriers to the handicapped and
     elderly........................................
    Exclusion for gain from certain small business    .......  .......  .......  .......  .......      0.9      1.0      1.0      1.1      1.1       5.1
     stock..........................................
    Distributions in redemption of stock to pay       .......  .......  .......  .......  .......    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.2
     various taxes imposed at death.................
    Inventory methods and valuation:
      Last in first out.............................      1.5      1.6      1.6      1.6      1.7      0.3      0.3      0.3      0.3      0.3       9.4
      Lower of cost or market.......................      0.1      0.1      0.1      0.1      0.1    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.4
      Specific identification for homogeneous           (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.1
       products.....................................
    Exclusion of gain or loss on sale or exchange of    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)  .......  .......  .......  .......  .......       0.1
     brownfield property............................
    Income recognition rule for gain or loss from         0.1      0.1      0.1      0.1      0.1      1.0      1.0      1.0      1.0      1.0       5.3
     section 1256 contracts.........................
    Net alternative minimum tax attributable to net      -0.5     -0.5     -0.5     -0.5     -0.5     -0.1     -0.1     -0.1     -0.1     -0.1      -3.0
     operating loss limitation*.....................
    Exclusion of interest on State and local            (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.1
     qualified private activity bonds for green
     buildings and sustainable design projects......
    Depreciation of buildings other than rental           0.2      0.2      0.2      0.2      0.2      0.2      0.2      0.2      0.2      0.2       2.2
     housing in excess of alternative depreciation
     system.........................................
    Depreciation of equipment in excess of the          -20.0    -18.0     -3.1      6.4     13.8     -8.2     -7.4     -1.3      2.6      5.7     -29.6
     alternative depreciation system\6\.............
Financial institutions:
  Exemption of credit union income..................      2.2      2.4      2.5      2.7      2.9  .......  .......  .......  .......  .......      12.7
  Insurance companies:
    Small life insurance company taxable income         (\4\)    (\4\)    (\4\)    (\4\)    (\4\)  .......  .......  .......  .......  .......       0.2
     adjustment.....................................
    Special treatment of life insurance company           2.9      3.2      3.3      3.3      3.3  .......  .......  .......  .......  .......      16.0
     reserves.......................................
    Special deduction for Blue Cross and Blue Shield      0.4      0.4      0.4      0.4      0.5  .......  .......  .......  .......  .......       2.2
     companies......................................
    Tax-exempt status and election to be taxed only       0.1      0.1      0.1      0.1      0.1  .......  .......  .......  .......  .......       0.5
     on investment income for certain small property
     and casualty insurance companies...............
    Interest rate and discounting period assumptions      2.3      2.6      2.6      2.6      2.6  .......  .......  .......  .......  .......      12.7
     for reserves of property and casualty insurance
     companies......................................
    Proration for property and casualty insurance         0.4      0.4      0.4      0.4      0.5  .......  .......  .......  .......  .......       2.1
     companies......................................
Transportation:
  Exclusion of employer-paid transportation benefits  .......  .......  .......  .......  .......      5.0      5.2      5.5      5.7      5.9      27.2
   (parking, van pools, and transit passes).........
  Deferral of tax on capital construction funds of        0.1      0.1      0.1      0.1      0.1  .......  .......  .......  .......  .......       0.5
   shipping companies...............................
  Exclusion of interest on State and local              (\4\)    (\4\)    (\4\)      0.1      0.1      0.1      0.1      0.1      0.1      0.1       0.6
   government qualified private activity bonds for
   highway projects and rail-truck transfer
   facilities.......................................
  Exclusion of interest on State and local              (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.1
   government qualified private activity bonds for
   high-speed intercity rail facilities.............
  Exclusion of interest on State and local                0.2      0.3      0.3      0.3      0.3      0.7      0.7      0.7      0.7      0.8       4.9
   government qualified private activity bonds for
   private airports, docks, and mass-commuting
   facilities.......................................
Community and Regional Development:
  Empowerment zone tax incentives...................      0.2    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.2
  New markets tax credit............................      1.1      1.1      1.2      1.1      1.0    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       5.5
  District of Columbia tax incentives...............    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.1
  Credit for Indian reservation employment..........    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)     (\4\)
  Exclusion of interest on State and local                0.1      0.1      0.1      0.1      0.1      0.3      0.3      0.3      0.4      0.4       2.3
   government qualified private activity bonds for
   sewage, water, and hazardous waste facilities....
  Recovery zone economic development bonds\2,3\.....    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)      0.2      0.2      0.2      0.2      0.2       0.9
  Eliminate requirement that financial institutions       0.5      0.5      0.5      0.5      0.5  .......  .......  .......  .......  .......       2.6
   allocate interest expense attributable to tax-
   exempt interest..................................
  Disaster Relief:
    National disaster relief........................
                                                                                             [Estimate contained in other provisions]
Education, Training, Employment, and Social
 Services:
  Education and training:
    Deduction for interest on student loans.........  .......  .......  .......  .......  .......      2.0      2.1      2.2      2.3      2.4      11.1
    Exclusion of earnings of Coverdell education      .......  .......  .......  .......  .......      0.1      0.1      0.1      0.1      0.1       0.5
     savings accounts...............................
    Exclusion of scholarship and fellowship income..  .......  .......  .......  .......  .......      2.7      2.9      3.0      3.2      3.4      15.2
    Exclusion of income attributable to the           .......  .......  .......  .......  .......      0.2      0.2      0.2      0.2      0.2       0.8
     discharge of certain student loan debt and NHSC
     and certain state educational loan repayments..
    Exclusion of employer-provided education          .......  .......  .......  .......  .......      1.2      1.2      1.2      1.3      1.3       6.2
     assistance benefits............................
    Exclusion of employer-provided tuition reduction  .......  .......  .......  .......  .......      0.3      0.3      0.3      0.3      0.3       1.6
     benefits.......................................
    Parental personal exemption for students aged 19  .......  .......  .......  .......  .......      4.5      4.7      4.9      5.2      5.5      24.7
     to 23..........................................
    Exclusion of interest on State and local              0.2      0.2      0.2      0.2      0.2      0.4      0.4      0.4      0.5      0.5       3.0
     government qualified private activity bonds for
     student loans..................................
    Exclusion of interest on State and local              1.0      1.0      1.0      1.1      1.1      2.6      2.6      2.8      2.9      3.1      19.1
     government qualified private activity bonds for
     private nonprofit and qualified public
     educational facilities.........................
    Credit for holders of qualified zone academy          0.2      0.2      0.2      0.2      0.2      0.1      0.1      0.1      0.1      0.1       1.4
     bonds\2,3\.....................................
    Deduction for charitable contributions to             0.3      0.4      0.4      0.4      0.4      6.2      6.4      6.6      6.8      7.1      35.0
     educational institutions.......................
    Credits for tuition for post-secondary            .......  .......  .......  .......  .......     19.7     21.0     21.2     12.5      9.6      84.0
     education\3\...................................
    Exclusion of tax on earnings of qualified
     tuition programs:
      Prepaid tuition programs......................  .......  .......  .......  .......  .......  .......  .......      0.1      0.1      0.1       0.3
      Savings account programs......................  .......  .......  .......  .......  .......      0.7      0.9      1.1      1.3      1.4       5.5
    Qualified school construction bonds\2,3\........    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)      1.0      1.1      1.2      1.3      1.4       6.0
  Employment:
    Exclusion of employee meals and lodging (other    .......  .......  .......  .......  .......      2.1      2.1      2.2      2.3      2.4      11.1
     than military).................................
    Exclusion of benefits provided under cafeteria    .......  .......  .......  .......  .......     35.2     36.1     37.6     39.4     40.2     188.5
     plans\7\.......................................
    Exclusion of housing allowances for ministers...  .......  .......  .......  .......  .......      0.8      0.8      0.8      0.8      0.8       4.0
    Exclusion of miscellaneous fringe benefits......  .......  .......  .......  .......  .......      7.5      7.7      7.8      8.0      8.2      39.2
    Exclusion of employee awards....................  .......  .......  .......  .......  .......      0.3      0.3      0.3      0.3      0.4       1.7
    Exclusion of income earned by voluntary           .......  .......  .......  .......  .......      3.2      3.2      3.3      3.3      3.4      16.4
     employees' beneficiary associations............
    Special tax provisions for employee stock             1.4      1.5      1.6      1.6      1.7      0.1      0.1      0.1      0.1      0.1       8.3
     ownership plans (ESOPs)........................
    Deferral of taxation on spread on acquisition of     -1.1     -1.2     -1.2     -1.1     -1.1      0.4      0.4      0.3      0.3      0.3      -4.1
     stock under incentive stock option plans*......
    Deferral of taxation on spread on employee stock     -0.1     -0.2     -0.2     -0.2     -0.2    (\4\)    (\4\)      0.1      0.1      0.1      -0.6
     purchase plans*................................
    Disallowance of deduction for excess parachute       -0.2     -0.2     -0.2     -0.2     -0.2  .......  .......  .......  .......  .......      -1.2
     payments (applicable if payments to a
     disqualified individual are contingent on a
     change of control of a corporation and are
     equal to or greater than three times the
     individual's annualized includible
     compensation)\8\*..............................
    Limits on deductible compensation\8\*...........     -0.8     -0.8     -0.9     -0.9     -0.9  .......  .......  .......  .......  .......      -4.3
    Work opportunity tax credit.....................      0.4      0.1  .......  .......  .......      0.1    (\4\)  .......  .......  .......       0.6
  Social services:
    Credit for children under age 17\3\.............  .......  .......  .......  .......  .......     57.1     56.0     55.8     55.6     42.5     267.0
    Credit for child and dependent care and           .......  .......  .......  .......  .......      4.7      4.8      4.8      4.8      4.9      24.0
     exclusion of employer-provided child care\3,9\.
    Credit for employer-provided dependent care.....    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.1
    Exclusion of certain foster care payments.......  .......  .......  .......  .......  .......      0.4      0.4      0.4      0.4      0.4       2.1
  Adoption credit and employee adoption benefits      .......  .......  .......  .......  .......      0.4      0.4      0.4      0.5      0.5       2.2
   exclusion........................................
  Deduction for charitable contributions, other than      1.0      1.1      1.1      1.1      1.1     36.2     37.3     38.5     39.8     41.1     198.4
   for education and health\10\.....................
  Credit for disabled access expenditures...........    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.3
Health:
  Exclusion of employer contributions for health      .......  .......  .......  .......  .......    145.5    143.8    151.4    159.6    169.4     769.8
   care, health insurance premiums, and long-term
   care insurance premiums\11\......................
  Exclusion of medical care and TRICARE medical       .......  .......  .......  .......  .......      2.6      2.7      2.8      2.9      2.9      13.9
   insurance for military dependents, retirees, and
   retiree dependents not enrolled in Medicare......
  Exclusion of health insurance benefits for          .......  .......  .......  .......  .......      0.9      0.9      1.0      1.0      1.1       4.9
   military retirees and retiree dependents enrolled
   in Medicare......................................
  Deduction for health insurance premiums and long-   .......  .......  .......  .......  .......      5.2      5.1      5.4      4.8      4.8      25.3
   term care insurance premiums by the self-employed
  Deduction for medical expenses and long-term care   .......  .......  .......  .......  .......     10.1     11.1     11.4     12.2     13.7      58.5
   expenses.........................................
  Exclusion of workers' compensation benefits         .......  .......  .......  .......  .......      4.9      5.0      5.1      5.2      5.3      25.6
   (medical benefits)...............................
  Health savings accounts...........................  .......  .......  .......  .......  .......      1.8      2.1      2.4      2.8      3.3      12.4
  Exclusion of interest on State and local                0.7      0.7      0.7      0.7      0.7      1.8      1.8      2.0      2.0      2.1      13.1
   government qualified private activity bonds for
   private nonprofit hospital facilities............
  Deduction for charitable contributions to health        1.9      1.9      2.0      2.0      2.1      3.2      3.3      3.4      3.5      3.6      26.7
   organizations....................................
  Credit for purchase of health insurance by certain  .......  .......  .......  .......  .......  .......    (\4\)    (\4\)    (\4\)    (\4\)       0.2
   displaced persons\3\.............................
  Credit for orphan drug research...................      0.8      1.0      1.1      1.2      1.3    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       5.3
  Tax credit for small businesses purchasing              0.2      0.2      0.1      0.1      0.2      1.2      0.9      0.6      0.8      0.9       5.2
   employer insurance...............................
  Subsidies for insurance purchased through health    .......  .......  .......  .......  .......     29.6     53.5     72.5     82.1     84.8     322.5
   benefit exchanges\3\.............................
Income Security:
  Exclusion of workers' compensation benefits         .......  .......  .......  .......  .......      2.7      2.9      3.0      3.2      3.3      15.1
   (disability and survivors payments)..............
  Exclusion of damages on account of personal         .......  .......  .......  .......  .......      1.7      1.7      1.7      1.7      1.8       8.5
   physical injuries or physical sickness...........
  Exclusion of special benefits for disabled coal     .......  .......  .......  .......  .......    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.1
   miners...........................................
  Net exclusion of pension contributions and
   earnings:
    Plans covering partners and sole proprietors      .......  .......  .......  .......  .......      8.0      9.3     10.7     15.5     17.7      61.1
     (sometimes referred to as Keogh plans).........
    Defined benefit plans...........................  .......  .......  .......  .......  .......     48.6     57.4     62.9     69.6     77.0     315.6
    Defined contribution plans......................  .......  .......  .......  .......  .......     72.8     82.7     98.9    117.6    132.9     504.8
  Individual retirement arrangements:
    Traditional IRAs................................  .......  .......  .......  .......  .......     20.9     12.9     13.6     14.5     15.3      77.2
    Roth IRAs.......................................  .......  .......  .......  .......  .......      7.1      7.0      7.7      8.5      9.2      39.5
  Credit for certain individuals for elective         .......  .......  .......  .......  .......      1.2      1.2      1.2      1.2      1.2       6.0
   deferrals and IRA contributions..................
  Exclusion of other employee benefits:
    Premiums on group term life insurance...........  .......  .......  .......  .......  .......      3.2      3.2      3.3      3.3      3.4      16.4
    Premiums on accident and disability insurance...  .......  .......  .......  .......  .......      4.1      4.2      4.4      4.6      4.8      22.2
  Additional standard deduction for the blind and     .......  .......  .......  .......  .......      2.7      2.8      3.0      3.3      3.5      15.3
   the elderly......................................
  Deduction for casualty and theft losses...........  .......  .......  .......  .......  .......      0.4      0.5      0.5      0.5      0.6       2.5
  Earned income credit\3\...........................  .......  .......  .......  .......  .......     72.7     73.3     76.0     73.8     75.6     371.4
  Phase out of the personal exemption for the         .......  .......  .......  .......  .......    -15.0    -15.9    -16.9    -17.9    -19.0     -84.6
   regular income tax, and disallowance of the
   personal exemption and the standard deduction
   against the alternative minimum tax*.............
  Exclusion of survivor annuities paid to families    .......  .......  .......  .......  .......    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.1
   of public safety officers killed in the line of
   duty.............................................
  Exclusion of disaster mitigation payments.........    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.2
  ABLE accounts\12\.................................  .......  .......  .......  .......  .......    (\4\)    (\4\)    (\4\)    (\4\)      0.1       0.1
Social Security and Railroad Retirement:
  Exclusion of untaxed Social Security and railroad   .......  .......  .......  .......  .......     37.6     39.6     41.9     44.2     46.8     210.1
   retirement benefits..............................
Veterans' Benefits and Services:
  Exclusion of veterans' disability compensation....  .......  .......  .......  .......  .......      6.8      7.6      7.4      7.1      7.9      36.8
  Exclusion of veterans' pensions...................  .......  .......  .......  .......  .......      0.2      0.2      0.2      0.2      0.2       0.9
  Exclusion of veterans' readjustment benefits......  .......  .......  .......  .......  .......      1.6      1.8      1.8      1.9      2.0       9.1
  Exclusion of interest on State and local              (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.3
   government qualified private activity bonds for
   veterans' housing................................
General Purpose Fiscal Assistance:
  Exclusion of interest on public purpose State and       9.7      9.8     10.1     10.3     10.6     25.6     26.0     26.7     29.1     29.9     187.7
   local government bonds...........................
  Deduction of nonbusiness State and local            .......  .......  .......  .......  .......     62.2     65.1     68.4     71.7     74.9     342.3
   government income taxes, sales taxes, and
   personal property taxes..........................
  Build America bonds\2,3\..........................  .......  .......  .......  .......  .......      3.2      3.2      3.2      3.2      3.2      16.0
Interest:
  Deferral of interest on savings bonds.............  .......  .......  .......  .......  .......      1.2      1.3      1.3      1.3      1.3       6.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Details may not add to totals due to rounding. An ``*'' indicates a negative tax expenditure for the 2015-2019 period.
 
\1\Reflects legislation enacted by September 30, 2015.
\2\Estimate includes an outlay to State and local governments. For the purposes of this table outlays are attributed to individuals.
\3\Estimate includes refundability associated with the following outlay effects:


 
                                                                      Corporations                                 Individuals
                                                                                                                                                  Total
                                                        2015     2016     2017     2018     2019     2015     2016     2017     2018     2019    2015-19
 
 
                                                     -------------------------------------------------------------------------------------------
 
    Credit for holders of clean renewable energy      .......  .......  .......  .......  .......    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.2
     bonds..........................................
    Credit for holders of qualified energy            .......  .......  .......  .......  .......    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.3
     conservation bonds.............................
    Recovery zone economic development bonds........  .......  .......  .......  .......  .......      0.2      0.2      0.2      0.2      0.2       0.8
    Credit for holders of qualified zone academy      .......  .......  .......  .......  .......      0.1      0.1      0.1      0.1      0.1       0.3
     bonds..........................................
    Credits for tuition for post-secondary education  .......  .......  .......  .......  .......      6.4      7.4      7.8      8.0  .......      29.6
    Qualified school construction bonds.............  .......  .......  .......  .......  .......      1.0      1.1      1.2      1.3      1.4       5.9
    Credit for children under age 17................  .......  .......  .......  .......  .......     33.7     33.9     34.5     35.0     22.1     159.2
    Credit for child and dependent care and           .......  .......  .......  .......  .......      0.9      1.0      1.0      0.9      0.9       4.7
     exclusion of employer-provided child care......
    Credit for purchase of health insurance by        .......  .......  .......  .......  .......  .......    (\4\)    (\4\)    (\4\)    (\4\)       0.1
     certain displaced persons......................
    Subsidies for insurance purchased through health  .......  .......  .......  .......  .......     25.8     46.3     63.0     71.3     73.7     280.1
     benefit exchanges..............................
    Earned income credit............................  .......  .......  .......  .......  .......     63.3     63.7     66.1     63.8     65.3     322.1
    Build America bonds.............................  .......  .......  .......  .......  .......      3.2      3.2      3.2      3.2      3.2      16.0
 
\4\Positive tax expenditure of less than $50 million.
\5\Estimate includes effect of credit for interest on certain home mortgages (Section 25).
\6\Includes bonus depreciation and general acceleration under MACRS.
\7\Estimate includes amounts of employer-provided health insurance purchased through cafeteria plans and employer-provided child care purchased through
  dependent care flexible spending accounts. These amounts are also included in other line items in this table.
\8\Estimate does not include effects of changes made by the Emergency Economic Stabilization Act of 2008.
\9\Estimate includes employer-provided child care purchased through dependent care flexible spending accounts.
\10\In addition to the general charitable deduction, the tax expenditure accounts for the higher percentage limitation for public charities, the fair
  market value deduction for related-use tangible personal property, the enhanced deduction for inventory, the fair market value deduction for publicly
  traded stock and exceptions to the partial interest rules.
\11\Estimate includes employer-provided health insurance purchased through cafeteria plans and TRICARE medical insurance, which are also included in
  other line items on this table.
\12\Estimate does not include outlays due to Medicaid


                     MACROECONOMIC FEEDBACK EFFECTS
                         OF PRO-GROWTH POLICIES

                              ----------                              


    Economic growth is one of the major determinants of revenue 
and spending levels--and therefore the size of budget 
deficits--over a given period. According to the Congressional 
Budget Office [CBO], if growth in real gross domestic product 
is just 0.1 percentage point higher than expected over its 10-
year window, revenue would be $286 billion higher--without tax 
increases--spending would be nearly $41 billion lower, and the 
cumulative deficit would fall by $327 billion.
    Conversely, as noted in the previous section, the lowering 
of economic growth projections raises significant difficulties 
in trying to restore fiscal balance. It poses a challenge for 
this budget resolution, which, as is customary, generally 
adopts CBO's economic assumptions. It also creates a 
disadvantage for congressional budgets compared with those of 
the President. The administration enjoys the luxury of using 
its own economic projections, rather than those of the 
nonpartisan CBO. In addition, the President's budget is a 
``post-policy'' presentation; that is, it incorporates any 
beneficial fiscal or economic effects the administration claims 
will result from its policies--something congressional budgets 
usually have not done.
    CBO has written extensively on the risks to the economy of 
deficits and debt, and how reducing deficits and debt would 
benefit the economy. Other policies likely to boost economic 
growth include fundamental tax reform, increasing domestic 
energy production, and the restoration of incentives for people 
to work, save, and invest.
    CBO's analysis of the fiscal path of this year's House 
budget resolution estimates that reducing budget deficits, 
thereby bending the curve on debt levels, would be a net 
positive for economic growth. According to that analysis, the 
fiscal year 2017 budget would increase real economic output per 
person by 1.7 percent, or about $1,100 in calendar year 2026, 
and by 6.3 percent, or about $4,900 in calendar year 2040 when 
compared with CBO's extended baseline. The analysis concludes 
that deficit reduction creates long-term economic benefits 
because it increases the pool of national savings and boosts 
investment, thereby raising economic growth and job 
creation.\29\ The greater economic output that stems from a 
large deficit-reduction package would have a sizeable impact on 
the Federal budget. For instance, higher output would lead to 
greater revenues through the increase in taxable incomes. Lower 
interest rates and a reduction in the stock of debt would lead 
to lower government spending on net interest expenses.
---------------------------------------------------------------------------
    \29\Congressional Budget Office, ``Budgetary and Economic Outcomes 
Under Paths for Federal Revenues and Noninterest Spending Specified by 
Chairman Price, March 2016,'' March 2016: https://www.cbo.gov/sites/
default/files/114th-congress-2015-2016/reports/51260-
BudgetaryPaths1.pdf.
---------------------------------------------------------------------------
    This year's budget resolution reduces deficits compared to 
CBO's January 2016 baseline by a total of $651 billion over 10 
years due to macroeconomic feedback effects on the budget. 
Lower deficits of $194 billion--consisting of $150 billion in 
higher revenues and $44 billion in lower mandatory outlays--is 
due to revised economic assumptions resulting from the 
macroeconomic feedback effects of legislation enacted late last 
year that made certain tax provisions permanent. These effects 
also include economic developments through the end of calendar 
year 2015 that were not included in the CBO baseline.\30\
---------------------------------------------------------------------------
    \30\Congressional Budget Office preliminary estimate of the 
macroeconomic feedback effects on the budget of recent legislation and 
economic developments not included in the CBO January 2016 baseline, 
released by email to House and Senate Budget Committees on 9 February 
2016.
---------------------------------------------------------------------------
    An additional $216 billion in lower deficits--a combination 
of $225 billion in higher revenues, without tax increases, and 
$9 billion in higher outlays--is due to the macroeconomic 
feedback effects of fully repealing the Affordable Care Act 
[ACA].\31\ CBO and the Joint Committee on Taxation [JCT] 
estimate that repealing the ACA would increase the level of 
gross domestic product by about 0.7 percent, on average, during 
the latter half of the budget window relative to current-law 
projections, mostly by increasing the supply of labor above 
what would be expected under a continuation of the ACA. In 
addition, CBO estimates the fiscal path of this budget 
resolution--which provides 10-year savings in spending of $6.5 
trillion from policy changes and debt service compared to 
current policy--would result in positive macroeconomic feedback 
effects that would further lower the deficit by approximately 
$241 billion.\32\
---------------------------------------------------------------------------
    \31\June 2015 published CBO/JCT estimate shifted forward 1 fiscal 
year of the macroeconomic feedback effects on the budget of a full and 
immediate repeal of the Affordable Care Act.
    \32\Congressional Budget Office, ``Budgetary and Economic Outcomes 
Under Paths for Federal Revenues and Noninterest Spending Specified by 
Chairman Price, March 2016,'' March 2016.

                        FUNCTIONAL PRESENTATION

                              ----------                              

    For decades, the budget resolution and accompanying report 
have presented the function-by-function breakdown in a manner 
that evolved mostly from practical and accounting 
considerations. The arrangement has changed little since 
enactment of the Congressional Budget Act of 1974.
    This resolution retains those conventional categories, as 
do the summary tables in the report. The narrative discussion 
below, however, takes a different approach. While keeping the 
content of the functional categories intact, it arranges them 
differently to reflect two important considerations: the 
crucial role of federalism in the United States' governing 
system, and the increasing burden of automatic spending 
programs (formally called ``direct'' or ``mandatory'' 
spending).
    The standard budget resolution format presents a range of 
government activities largely without distinguishing those of 
principal importance to the national government from those that 
may draw greater initiative from States and localities or the 
private sector. While National Defense and International 
Affairs appear first--as is appropriate for two of the Federal 
Government's main responsibilities--the sequencing of the 
remaining functions seems to lack any logic other than their 
function numbers. There is no reason, for example, why Energy 
(Function 270) should appear before Health (Function 550), or 
Veterans Benefits and Services (Function 700), or 
Administration of Justice (Function 750).
    The narratives below are arranged to make such a 
distinction. The presentation retains the content of each 
functional category, just as in the conventional format, but 
organizes the functional discussions in four broader categories 
as described below. The aim is to provoke a re-evaluation of 
the roles of different layers of government, and to group 
together the government's major domestic benefits programs, 
reflecting their substantial and growing impact on the budget. 
Put another way, the format encourages lawmakers and the public 
to think differently about the budget by looking at it 
differently.
    The groupings are as follows:

    Principal Federal Responsibilities. The first grouping 
consists of those activities clearly associated with the 
national level of government. Everyone would place national 
defense and international affairs in this group, as directed by 
the Constitution itself. That simplistic division, however, 
fails to acknowledge several other categories for which the 
Federal Government also has the central responsibility. These 
include veterans' benefits (an aspect of the compensation for 
military service), Federal courts and law enforcement, and 
general government, the last of which mainly finances the 
Legislative and Executive branches of the Federal Government. 
Also included here are the Overseas Contingency Operations/
Global War on Terrorism, which finance non-recurring military 
and diplomatic activities in the Middle East. The overall 
grouping, using the formal functional titles, is as follows:
     LNational Defense
     LInternational Affairs
     LOverseas Contingency Operations/Global War on 
Terrorism
     LVeterans Benefits and Services
     LAdministration of Justice
     LGeneral Government
     LGovernment-Wide Policy

    Domestic Priorities. This second set of functions draws 
together mainly the discretionary spending for activities that 
may be best administered or initiated by State and local 
governments or the private sector--and most of which would 
exist even if there were no Federal Government. This does not 
suggest they are of lesser priority; indeed, their importance 
is so immediate and direct that they benefit most from the 
initiative of those closest and most directly involved. This 
arrangement aims to encourage greater flexibility for States 
and localities and the private sector to drive these 
activities. (In the conventional format, these are Functions 
250 through 650.) Although the discussion here focuses on the 
discretionary spending in these categories, two sections--
Energy and Transportation -reflect both the discretionary and 
direct spending components. This is because in these areas, the 
two forms of spending are intertwined in ways unlike those of 
other functional categories.
     LGeneral Science, Space, and Technology
     LEnergy (both discretionary and direct)
     LNatural Resources and Environment
     LAgriculture
     LCommerce and Housing Credit
     LTransportation (both discretionary and direct)
     LCommunity and Regional Development
     LEducation, Training, Employment, and Social 
Services
     LHealth
     LIncome Security
     LOther Domestic Discretionary (mainly the 
administration of the Social Security and Medicare Programs)

    Direct Spending Programs. This group reflects solely the 
automatic spending components of Functions 250 through 650 in 
the conventional format. The aim is to show the magnitude of 
these programs--mostly for social insurance and safety net 
programs--in the overall budget. This form of spending is 
largely open-ended and flows from effectively permanent 
authorizations. Most of the programs funded this way pay 
benefits directly to groups and individuals without an 
intervening appropriation. They spend without limit, and their 
totals are determined by numerous factors outside the control 
of Congress: caseloads, the growth or contraction of GDP, 
inflation, and many others.
     LSocial Security
     LMedicare
     LMedicaid, the Affordable Care Act, and Related 
Programs
     LIncome Support, Nutrition, and Related Programs
     LFarm Support
     LBanking, Housing, and the Postal Service
     LStudent Loans, Social Services, and Related 
Programs
     LFederal Lands and Other Resources
     LOther Direct Spending (science, natural 
resources, and community and regional development)

    Financial Management. This final grouping consists of those 
functions that round out the budget's overall financing.
     LNet Interest
     LAllowances
     LUndistributed Offsetting Receipts

                   Principal Federal Responsibilities

                              ----------                              

    The two most obvious responsibilities of the national 
government are providing for the common defense of all the 
constituent States, and conducting diplomacy on behalf of the 
Nation as a whole. Related to these two is the supplemental 
spending for the Overseas Contingency Operations/Global War on 
Terrorism. As part of the compensation for military service, 
the government also offers a range of benefits specifically for 
veterans. The category called Administration of Justice mainly 
reflects funding for Federal law enforcement agencies--such as 
the Federal Bureau of Investigation and the Drug Enforcement 
Administration, among others--as well as the Federal judiciary. 
The vast majority of funding for the General Government 
function supports the Executive and Legislative Branches of the 
Federal Government. Included in this grouping as well are 
several government-wide savings policies.

                            NATIONAL DEFENSE


                            Function Summary

    The Federal Government has no higher responsibility than to 
``provide for the common defense'' of the Nation. No other 
level of government can do this, and it is not an option; it is 
a constitutional duty--one whose gravity is intensifying. The 
global security environment is growing more dangerous, as the 
United States faces increasingly complex and evolving threats 
around the world. These include, but are not limited to, the 
following:

      Russian aggression in Eastern Europe;

      Terrorist activities by the Islamic State and 
other networks;

      The nuclear and missile programs of North Korea 
and Iran;

      China's ambitions to aggressively exert influence 
in the Asia-Pacific.

    As Henry A. Kissinger, former Secretary of State, testified 
to the Senate Armed Services Committee last year on the global 
security environment: ``[W]e haven't faced such diverse crises 
since the end of the Second World War.''\33\ General Martin E. 
Dempsey, former Chairman of the Joint Chiefs of Staff, echoed 
this assessment more recently, testifying that ``the global 
security environment is as uncertain as I've ever seen it . . . 
the world is rapidly changing everywhere, and we're seeing 
significant shifts in an already complex strategic 
landscape.''\34\
---------------------------------------------------------------------------
    \33\Committee on Armed Services, U.S. Senate, ``Global Challenges 
and the U.S. National Security Strategy,'' hearing 29 January 2015.
    \34\Committee on Armed Services, U.S. Senate, ``Counter-ISIL 
(Islamic State of Iraq and the Levant) Strategy,'' hearing 7 July 2015.
---------------------------------------------------------------------------
    Recent terrorist attacks in Paris and San Bernardino, CA, 
reflect this new reality. Americans deserve leaders who are 
committed to executing their constitutional duty to defend the 
Nation. Truly assessing the threats and developing a strategy 
to deter and combat them while mitigating risk as far as 
possible should be the ultimate objective of the administration 
and defense leaders. The President and the Congress must then 
be honest about the true costs of the strategy, and provide 
full funding for its implementation.
    According to the House Armed Services Committee: 
``Reclaiming our role as a global leader does not mean the 
United States must `police' the world; rather, the United 
States must engage when hostile actors threaten our interests 
and must reassure allies in order to preserve the international 
order that the United States has painstakingly established. If 
not, as we have seen in places such as Syria, Ukraine, and the 
South China Sea, others will fill the vacuum and establish an 
order that is inconsistent with our values and our security.'' 
To meet the demands of the 21st century, the committee says, 
the U.S. military needs both strength and agility. ``Military 
strength requires enough capability to deal with a wide array 
of threats--both quality and quantity.'' As for agility, the 
committee argues: ``We must have the military capability able 
to protect us from unknown and unexpected threats. We have to 
be able to learn, to anticipate, and to adapt faster than 
anyone else.''\35\
---------------------------------------------------------------------------
    \35\Committee on Armed Services, U.S. House of Representatives, 
Views and Estimates, 5 February 2016.
---------------------------------------------------------------------------
    Following the prescription above for executing national 
security policy has been challenging in recent years due to 
laws designed to curtail spending and put the Federal 
Government on a fiscally sustainable path. While the Department 
of Defense has been expected to do more in terms of foreign 
engagement, funding for these requirements has been reduced. 
The national defense budget has carried the bulk of 
sequestration's effects after the enactment of the Budget 
Control Act [BCA] of 2011. Compared to the planned defense 
spending requested by then-Secretary Robert M. Gates in 2011--
the last time the Department was able to truly align a funding 
request with a strategy--the automatic enforcement procedures 
of the BCA will arbitrarily cull almost $1 trillion from 
defense, eroding critical warfighting capabilities, 
modernization, and readiness across all the services. According 
to General Dempsey, the Department's request for fiscal year 
2016 was insufficient to execute the national security strategy 
with acceptable levels of risk: the budget request was ``at the 
lower ragged edge of manageable risk'' and offered ``no slack, 
no margin left for error or strategic surprise.''\36\ Yet 
Congress underfunded defense by $5 billion. Every year since 
the BCA was enacted, budgetary prescriptions have been shaping 
national defense strategy, not the other way around, resulting 
in higher risks for service members and the Nation. According 
to the House Armed Services Committee: ``[O]ur national 
security strategy has not evolved to mitigate the risks we face 
or reconcile the resources available to counter those 
threats.''\37\ The mismatch between strategy and funding is 
unacceptable and needs to change.
---------------------------------------------------------------------------
    \36\Committee on Armed Services, U.S. Senate, ``Review of the 
Defense Authorization Request for Fiscal Year 2016 and the Future Years 
Defense Program,'' hearing 3 March 2015.
    \37\Committee on Armed Services, U.S. House of Representatives, 
Views and Estimates, 5 February 2016.
---------------------------------------------------------------------------
    Turning to the fiscal year 2017 budget, the administration 
is requesting $551 billion for base national defense funding 
for the budget year, in line with the Bipartisan Budget Act of 
2015, and $6.2 trillion over the 10-year window. In fiscal 
years 2018 and beyond, the administration assumes base defense 
spending above the Budget Control Act caps claiming ``the 
nation's defense strategy cannot be executed at sequester-
levels of funding.''\38\ While this budget matches the 
administration's fiscal year 2017 defense request, consistent 
with the maximum level allowed under current law, it provides 
$6.3 trillion over the 10-year window, nearly $90 billion above 
the administration's plan. Further, this budget assumes $23 
billion in overseas contingency operations funding to be 
dedicated to base defense requirements, bringing total 
resources for base defense funding to $574 billion (see section 
on Overseas Contingency Operations/Global War on Terrorism). It 
is now more critical than ever to ensure the U.S. military has 
all the resources it needs as it continues to engage in ever-
evolving threats in the Middle East and around the globe.
---------------------------------------------------------------------------
    \38\Department of Defense Office of the Under Secretary of Defense 
(Comptroller) Chief Financial Officer, Defense Budget Overview Fiscal 
Year 2017 Budget Request, February 2016.
---------------------------------------------------------------------------
    The resolution specifies $559.3 billion in total budget 
authority and $566.5 billion in total outlays in fiscal year 
2017, per current law (see Function 050 in the summary tables). 
These amounts include funding to compensate, train, maintain, 
and equip the military forces of the United States. More than 
95 percent of the funding in this function goes to Department 
of Defense military activities. The remainder funds the atomic 
energy defense programs of the Department of Energy, and other 
defense-related activities (primarily in connection with 
homeland security).
    Almost all of defense funding comes through annually 
appropriated, discretionary spending, which in this resolution 
totals $551.1 billion in budget authority and $557.7 billion in 
outlays in fiscal year 2017. This is the established level 
provided for in the Bipartisan Budget Act of 2015, which 
amended the Budget Control Act caps. Direct spending in 2017 
for this category--which includes allowances, offsetting 
receipts, and retirement payments--is $8.2 billion in budget 
authority and $8.7 billion in outlays in fiscal year 2017. The 
10-year totals for the entire defense category are $6.4 
trillion in budget authority and $6.2 trillion in outlays.
    Funding for the Pentagon's non-enduring activities in 
Afghanistan and Iraq is carried in a separate function called 
Overseas Contingency Operations/Global War on Terrorism (see 
Function 970 in the summary tables).

                      Illustrative Policy Options

    Policy development in this area rests with the Committee on 
Armed Services and the Appropriations Subcommittee on Defense. 
They will arrange priorities for maintaining robust national 
defense capabilities while responsibly managing taxpayer 
resources. Some illustrative areas of particular concern 
include the following.

    Military Compensation and Benefits. As discussed in last 
year's budget resolution, the current compensation and benefits 
system for military personnel, retirees, and their families is 
unsustainable. Consequently, the fiscal year 2016 budget 
resolution encouraged the committees of jurisdiction to review 
the recommendations of the Military Compensation and Retirement 
Modernization Commission [MCRMC]\39\ and consider reforms to 
sustain the long-term fiscal health of these programs, 
especially the retirement and health care benefits. In the 
Fiscal Year 2016 National Defense Authorization Act (Public Law 
114-92), the Armed Services Committees successfully included 
substantial reforms to the military retirement system, 
expanding the benefits to all military personnel while 
simultaneously putting the program on a fiscally sustainable 
path. According to the Congressional Budget Office [CBO], the 
new system will yield significant long-term savings in direct 
spending, with expected annual outlay reductions of about 20 
percent, or $10 billion.\40\ This laudable achievement on the 
part of the Armed Services Committee members and the Congress 
will ultimately provide a better and fairer benefit for all 
military personnel in the future, while maintaining the 
benefit's sustainability.
---------------------------------------------------------------------------
    \39\The Fiscal Year 2013 National Defense Authorization Act 
established the MCRMC to conduct a comprehensive review of military 
compensation and retirement systems and ultimately make recommendations 
to do the following: ensure the long-term viability of the All-
Volunteer Force; enable quality of life for military personnel that 
fosters successful recruitment, retention, and careers; and modernize 
and achieve fiscal sustainability for the compensation and retirement 
systems.
    \40\Congressional Budget Office, Cost Estimate of H.R. 1735 
National Defense Authorization Act for Fiscal Year 2016, 11 May 2015.

    Military Health Care. The health care system that benefits 
military personnel, their families, and retirees also needs 
reform. In their findings, the MCRMC members reported that 
``the quality of TRICARE benefits as experienced by service 
members and their families has decreased, and the fiscal 
sustainability of the program has declined.''\41\ In 1990, 
funding for military health care accounted for approximately 4 
percent of the Department's budget; in 2016, the administration 
requested, and Congress appropriated, health care funding 
accounting for 9 percent of the Department's base budget.\42\ 
This increased proportional growth in health care spending 
occurred even as the total defense budget significantly 
increased between 2000 and 2012. Consequently, Congress made 
changes to the system to help rein in cost growth rates, 
including Federal ceiling prices for prescription drugs. 
Nevertheless, more needs to be done. Reforming the military 
health care system is a priority for the House Armed Services 
Committee, which plans on ``examining the whole military health 
care system'' with the goal of ensuring it ``can sustain 
trained and ready health care providers to support the 
readiness of the force and a quality health care benefit that 
is valued by its beneficiaries.''\43\ Once again, this budget 
supports the Armed Services Committee's efforts to tackle this 
issue, and the Budget Committee looks forward to seeing the 
resulting policy recommendations expected later this year.
---------------------------------------------------------------------------
    \41\Military Compensation and Retirement Modernization Commission, 
Final Report of the Military Compensation and Retirement Modernization 
Commission, January 2015, p. 81.
    \42\Congressional Budget Office, Long-Term Implications of the 2016 
Future Years Defense Program, January 2016.
    \43\Committee on Armed Services, U.S. House of Representatives, 
Views and Estimates, 5 February 2016.

    Budget Transparency. Like all government agencies, the 
Department of Defense has a responsibility to account for and 
effectively manage its taxpayer-provided resources. The 
continued failure of the Defense Department to receive a clean 
audit from the Government Accountability Office not only limits 
transparency and congressional oversight of defense programs, 
but also erodes public confidence in the Department's ability 
to effectively spend taxpayer resources. According to the House 
Armed Services Committee: ``For more than 20 years, the 
Comptroller General of the United States has consistently 
identified the financial management of the Department of 
Defense as a high-risk area.''\44\ This is especially 
disconcerting during times of fiscal constraint, when it is 
more important than ever for agencies to complete self-
assessments to make tough decisions on setting priorities with 
limited resources. The Fiscal Year 2010 National Defense 
Authorization Act (Public Law 111-84) required the Department 
to implement the Financial Improvement and Audit readiness 
plan, and the Department expects full auditability by the end 
of fiscal year 2017. The budget anticipates the Pentagon's full 
attention to meeting its auditability goals and continued 
Department efforts to effectively allocate existing resources.
---------------------------------------------------------------------------
    \44\Ibid.

    Defense Industrial Base and Sustainment. A robust 
industrial base is vital to the national security of the United 
States and to military readiness. As defense budgets have 
declined, there has been a much needed focus on the acquisition 
of new weapons systems to modernize the armed forces. Little 
attention, however, has been given to the inescapable fact that 
sustainment is 60 percent to 80 percent of the total lifecycle 
cost of a weapons system, according to the Department of 
Defense.\45\ Therefore, the ongoing health of the defense 
industrial base, in its entirety, also must be carefully 
considered.
---------------------------------------------------------------------------
    \45\Government Accountability Office, Weapon Systems Management: 
DOD Has Taken Steps to Implement Product Support Managers but Needs to 
Evaluate Their Effects, April 2014.
---------------------------------------------------------------------------
    The sustainment industrial base comprises both private 
sector and military facilities, each serving a unique and vital 
role in the maintenance, repair, and overhaul of weapons, 
weapons systems, components, subcomponents, parts, and 
equipment. As budget resources become more scarce, the military 
facilities and private sectors should focus on the areas in 
which each excels, entering into public-private partnerships, 
as appropriate, to save taxpayer dollars and increase the 
warfighter's readiness. Furthermore, the Department should 
learn from recent mistakes and failed policies, which include 
the unnecessary furlough of working capital fund employees or 
managing by end strength. Workload should be one of the key 
drivers when managing depots, arsenals, and ammunition plants 
to ensure the lowest cost to the taxpayer.
    Military depots are the backbone of the organic industrial 
base and are the Nation's insurance policy against the tides of 
economic uncertainty, changes in the defense industry, and 
wartime demands. Additionally, military depots serve as the 
appropriate location to maintain command and control of the 
majority of warfighting systems. The B-52 bomber program, as 
one example, is a reminder that sustainment of weapons systems 
for decades beyond their initially projected lifecycle is here 
to stay and will be essential to meeting military readiness 
needs. Military depots have proven their value to the taxpayer 
for efficiently sustaining systems that are no longer 
profitable or no longer cost-effective to maintain in the 
private sector. During peacetime or war, military depots meet 
military readiness requirements and provide critical and 
necessary skill sets on time and on budget.
    Acquisition reform should reaffirm the value of military 
core statutes and the longstanding balance of workload between 
military depots and the private sector. These key provisions in 
existing law, when vigorously enforced, will ensure that the 
vital security interests of the United States military are met 
through the maintenance of a healthy defense industrial base, 
even during a time of declining budgets.

                         INTERNATIONAL AFFAIRS


                            Function Summary

    The international affairs budget is critical in advancing 
U.S. strategic priorities and interests, especially those 
relating to economic opportunities, national security, and 
American values. That said, duplicative programs, programs 
unrelated to vital U.S. national interests, and inefficiencies 
are prevalent in the budget and should be addressed. This 
budget resolution represents a thorough re-evaluation of 
accounts in this category and gives priority to programs that 
are both integral to the core mission and that effectively and 
efficiently achieve desired outcomes.
    From World War II, through the end of the Cold War, and 
into the 21st century, the United States has remained essential 
to the security of its allies and the international 
community.\46\ The U.S. is vital to international peace, 
security, stability, and the spread of democracy and freedom. 
America needs to maintain a diplomatic and economic engagement 
in the world that will ensure its ``principles of democracy, 
opposition to aggression and intimidation by authoritarian 
regimes, and a strong assistance program that assists allied 
partners.''\47\
---------------------------------------------------------------------------
    \46\The Foreign Policy Initiative, Foreign Policy 2015, 30 
September 2015, http://foreignpolicyi.org/files/uploads/images/2015-09-
30-Foreign%20Policy%202015.pdf.
    \47\Ibid.
---------------------------------------------------------------------------
    According to the Committee on Foreign Affairs, reducing 
poverty through economic growth is a ``key objective of the 
U.S. national security strategy and core responsibility of the 
Federal departments and agencies implementing U.S. foreign 
assistance programs.''\48\ The failure to properly manage 
foreign aid resources will not only doom U.S. development 
programs, but will also continue the cycle of dependence on 
U.S. foreign aid.\49\
---------------------------------------------------------------------------
    \48\Committee on Foreign Affairs, U.S. House of Representatives, 
Views and Estimates, 4 February 2016.
    \49\Ibid.
---------------------------------------------------------------------------
    The United States and its citizens face grave new threats, 
and must ``refrain from pursuing a protectionist and 
isolationist retreat.''\50\ The new challenges America faces 
today require a ``vision and policies anchored not in the 
fatalism of U.S. decline, but rather in a renewed commitment to 
a strong and enduring American global leadership.''\51\
---------------------------------------------------------------------------
    \50\The Foreign Policy Initiative, op cit.
    \51\Ibid.
---------------------------------------------------------------------------
    For this budget category (Function 150 in the summary 
tables), the budget resolution proposes a total of $39.8 
billion in budget authority and $43.7 billion in outlays for 
fiscal year 2017. This funding covers the following: 
international development, food security, and humanitarian 
assistance; international security assistance; the conduct of 
foreign affairs; foreign information and exchange activities; 
and international financial programs. The primary agencies 
responsible for executing these programs are the Departments of 
State, Agriculture, and the Treasury; the U.S. Agency for 
International Development [USAID]; and the Millennium Challenge 
Corporation. Over 10 years the budget totals are $405.4 billion 
in budget authority and $401.2 billion in outlays.
    The majority of the funding is discretionary spending, 
which is $35.8 billion in budget authority and $45.3 billion in 
outlays for fiscal year 2017. Direct spending in this 
function--totaling $4.0 billion in budget authority and -$1.6 
billion in outlays for fiscal year 2017--includes loan 
guarantee programs, payments to the Foreign Service Retirement 
and Disability Fund, and foreign-military sales programs. The 
negative figures reflect receipts from foreign-military sales 
and financing programs.
    As with National Defense, funding for the State Department 
and USAID's incremental, non-enduring civilian activities in 
the frontline states of the global war on terrorism is 
reflected in the category called Overseas Contingency 
Operations/Global War on Terrorism.

                   Reorganize the Department of State

    The Constitution invests foreign-policymaking power in the 
President by granting that office the authority to negotiate 
treaties and appoint ambassadors. To assist the President in 
discharging his foreign affairs duties, the Congress in 1789 
created the Department of State, the first executive department 
established.\52\ The core responsibilities of the Department's 
Secretary are diplomacy, providing foreign policy advice to the 
President, understanding the international environment, and 
advancing U.S. interests abroad.\53\
---------------------------------------------------------------------------
    \52\U.S. Department of State, ``Duties of the Secretary of State,'' 
20 January 2009: http://www.state.gov/secretary/115194.htm.
    \53\Ibid.
---------------------------------------------------------------------------
    An effective American foreign policy depends on a strong 
State Department, but strategic guidance and accountability are 
hard to find. State's diminished relevance can be attributed to 
failings in three principal areas: human resources, programs, 
and the Department's organizational structure.\54\
---------------------------------------------------------------------------
    \54\Quadrennial Diplomacy and Development Review, Enduring 
Leadership in A Dynamic World, 2015: http.//www.state.gov/documents/
organization/241429.pdf.
---------------------------------------------------------------------------
    As identified in the Department's Quadrennial Diplomacy and 
Development Review [QDDR] of 2015, the Department needs to 
modernize how it recruits or acquires necessary skill sets and 
invest in training for employees to meet current and 
forthcoming challenges.\55\ The Department is unable to pivot 
from crisis to crisis efficiently as obsolete skill sets cannot 
be downsized to create room for those in demand. Currently, the 
Department does not give priority to the training of its 
employees, especially with respect to leadership skills. As a 
result, Department staff members do not build expertise 
commensurate with their private sector counterparts.
---------------------------------------------------------------------------
    \55\Ibid.
---------------------------------------------------------------------------
    The 2015 QDDR identified the need to ``deepen expertise in 
planning and performance management.''\56\ This is especially 
true with respect to how the Department deploys foreign 
assistance programs. Currently, monitoring and evaluation of 
Department programs is sporadic and does not inform future 
programming decisions. The Department's goals and objectives 
are vague or broad to the point that they could not reasonably 
be identified. At the country level, goals such as encouraging 
a given country to become more democratic are empty and provide 
no strategic guidance on implementation.\57\ At the program 
level, every program is deemed a success because goals are 
quantitative (e.g. number of people trained or textbooks 
distributed) rather than qualitative. As a result, foreign 
assistance funding does not advance discrete foreign policy 
objectives, and only anecdotal success is identifiable. To 
date, only one country (Greece) has ever ``graduated,'' or 
advanced on both the political and economic scale, to warrant 
an end to U.S. foreign assistance.\58\ Such stark figures 
should call into question the entire foreign assistance model 
as currently employed by the Department of State.
---------------------------------------------------------------------------
    \56\Ibid.
    \57\Ibid.
    \58\Ibid.
---------------------------------------------------------------------------
    With the increase in crises around the world, the 
Department has assumed new responsibilities leading to an ever-
expanding bureaucracy, now desperately in need of rightsizing. 
While the number of assistant secretary positions is capped by 
Congress at 24, the Department has vastly increased its use of 
``special envoys,'' ``ambassadors-at-large,'' ``special 
advisers,'' and ``coordinators.''\59\ Issues that are naturally 
cross-regional or cross-functional are given their own office 
or bureau and associated budget thereby creating redundancy 
with existing offices and activities. The Department has 
struggled to reduce these areas of overlap as bureaus and 
offices fiercely protect budgets and resources.
---------------------------------------------------------------------------
    \59\Ibid.
---------------------------------------------------------------------------
    The Department is now approaching a period of transition 
and new leadership, providing a natural opportunity to 
undertake far-reaching, and long overdue, reforms. In addition 
to the three areas addressed above, State should consider other 
reforms that have been initiated but remain incomplete. For 
example, integrating USAID into the Department of State will 
enable the U.S. to structure more effective foreign assistance 
programs. When it comes to advancing democracy, which is 
inherently tied to America's diplomacy, USAID will be best 
served by being integrated into a single entity responsible for 
all of America's foreign policy.

           Illustrative Discretionary Spending Policy Options

    The committees of jurisdiction--the Committees on Foreign 
Affairs and Agriculture, as well as the Appropriations 
Subcommittee on State, Foreign Operations, and Related 
Programs--should continue effective oversight of international 
affairs programs to ensure resources are used efficiently to 
achieve desired results that ultimately support U.S. national 
interests. While the final policy choices will lie with the 
committees, some options worthy of consideration might include 
the following.

    Reform Food Aid. One of the areas where the international 
affairs budget fails to use taxpayer dollars efficiently and 
effectively is the U.S. international food aid program, 
including Food for Peace (Public Law 480, Title II), which 
provides emergency food assistance abroad and supports 
development programs in developing nations. Its failings result 
primarily from enduring program constraints, including the 
cargo preference (which dictates at least 50 percent of food 
aid must be shipped on U.S. flagged vessels). Other impediments 
include the requirement that 100 percent of food commodities be 
produced in the U.S., and monetization requirements, the 
practice of selling U.S. commodities on foreign markets to fund 
development projects. Several bipartisan efforts have called 
for reforming food programs. According to a 2011 report by the 
Government Accountability Office [GAO], the practice of 
monetization loses an average of 25 cents of every dollar spent 
on food aid.\60\ This budget therefore endorses food aid 
reforms to get maximum benefit out of every dollar spent on 
this program.
---------------------------------------------------------------------------
    \60\Government Accountability Office, International Food 
Assistance: Funding Development Projects through the Purchase, 
Shipment, and Sale of U.S. Commodities Is Inefficient and Can Cause 
Adverse Market Impacts, 23 June 2011.

    Overhaul the Broadcasting Board of Governors. For years, 
the Office of the Inspector General and the Government 
Accountability Office have noted inefficiencies and redundant 
bureaucratic structures within the Broadcasting Board of 
Governors [BBG]. This budget calls for overhauling the 
governing structure and organization of the BBG, with a 
reduction in funds until such changes are made. The BBG, which 
became an independent entity in 1998, is responsible for 
directing and overseeing all U.S. international broadcasting 
services, such as Voice of America. BBG is mostly known for 
programs that educate the world on American culture, society, 
and governance, in addition to promoting democratic principles 
such as human rights and religious freedom. While international 
broadcasts can be an effective tool in executing America's 
foreign policy objectives, BBG fails to efficiently implement 
its mission due to egregious mismanagement, lack of 
accountability, and program overlap. In July 2014, the House 
passed H.R. 4490, the United States International 
Communications Reform Act of 2014, a bipartisan reform bill 
that addresses these problems to improve the management and 
effectiveness of BBG programs. The Committee on Foreign Affairs 
reiterates the critical need to reform the BBG: ``In order to 
confront the challenges posed by Islamic State and Russian 
propaganda, among others, Congress must first fix the 
organization charged with leading this effort.''\61\ 
Consequently, this budget supports a reduction in funding for 
BBG until significant reforms are made as to safeguard taxpayer 
dollars from continued waste at the hands of governmental 
mismanagement.
---------------------------------------------------------------------------
    \61\Committee on Foreign Affairs, U.S. House of Representatives, 
Views and Estimates, 4 February 2016.

    Eliminate Contributions to the Clean Technology Fund and 
the Strategic Climate Fund. The Obama Administration created 
the Clean Technology and Strategic Climate Funds in 2010. They 
provide foreign assistance to support energy-efficient 
technologies intended to reduce energy use and mitigate climate 
change. Borrowing funds abroad to provide financial assistance 
in this area is not a core U.S. foreign policy function--
especially during times of large and mounting debt. In 
addition, the government should not attempt to pick winners and 
losers in terms of which technologies and companies to favor 
and advance abroad. Both programs should be considered for 
---------------------------------------------------------------------------
elimination.

    Reduce Education Exchange Programs. Function 150 includes 
two education exchange accounts intended to encourage mutual 
understanding between Americans and citizens around the world 
through scholarship and leadership programs: Educational and 
Cultural Exchange Programs and the Open World Leadership 
Center. Although their mission is laudable, exchange programs 
are a non-essential component of the foreign-affairs budget and 
should be reduced accordingly. When reduction decisions for 
these accounts are made, the priority should go to programs 
that are in line with U.S. strategic interests and that receive 
matching foreign-government contributions, such as the 
Fulbright Program.

    Reduce Contributions to International Organizations and 
Programs. The United States makes voluntary contributions to 
several multilateral organizations and programs. These often 
duplicate funding provided in the Contributions to 
International Organizations [CIO] account, which makes payments 
to organizations pursuant to treaties the United States has 
signed. Further, United States contributions to the United 
Nations Development Program [UNDP], which has been flagged by 
the Special Inspector General for Afghanistan Reconstruction 
[SIGAR] as problematic, flow through this account. According to 
SIGAR, UNDP's oversight and management of the Law and Order 
Trust Fund for Afghanistan--to which the United States and 
other donors have contributed more than $3 billion since 2002--
is weak, making taxpayer dollars susceptible to fraud, waste, 
and abuse.\62\ Although this budget fully funds the CIO 
account, it does not support voluntary contributions for the 
International Organizations and Programs account, including 
contributions to the UNDP.
---------------------------------------------------------------------------
    \62\John F. Sopko, Special Inspector General for Afghanistan 
Reconstruction, letter to Helen Clark, UNDP Administrator, 12 September 
2014: http://www.sigar.mil/pdf/special%20projects/SIGAR-14-98-SP.pdf.

    Eliminate Funding for Peripheral Foreign-Affairs 
Institutions. The United States funds multiple independent 
agencies and quasi-private institutions through the foreign-
affairs budget. Included in this list are the Inter-American 
Foundation, the African Development Foundation, the East-West 
Center, and the Asia Foundation. These institutions all engage 
in activities that overlap the State Department and USAID 
activities. Consolidating and eliminating funding for multiple 
institutions that perform similar tasks will make U.S. 
engagement with the world more efficient and cost-effective. 
Further, some of these organizations already receive private 
---------------------------------------------------------------------------
funding and could continue with non-government funds.

    Make the Millennium Challenge Corporation Lead Agency on 
Foreign-Development Assistance. The United States has two 
primary foreign-development assistance programs: USAID's 
Development Assistance program and the Millennium Challenge 
Corporation [MCC].\63\ Funding for foreign aid and helping 
other nations rise toward prosperity keep the United States 
safe and strengthen the economy by establishing new trading 
partners and markets. Such development assistance is 
worthwhile, however, only if it produces results for the aid 
recipients.
---------------------------------------------------------------------------
    \63\Committee on Foreign Affairs, U.S. House of Representatives, 
Views and Estimates, 4 February 2016.
---------------------------------------------------------------------------
    America's experience with having two development-assistance 
programs has shown that MCC's model has been more effective in 
achieving results. MCC's emphasis on outcomes rather than 
inputs should be the foundation of all U.S. development-
assistance programs. Other elements of MCC's model that should 
be extended throughout U.S. development-assistance programs 
include the following:

      Strict requirements on recipient countries to 
prove strong commitments to good governance, economic freedom, 
and investment in their citizens in order to be considered for 
aid;

      A willingness of the U.S. government to terminate 
assistance if an aid recipient starts to fail on these critical 
commitments;

      Country ownership, which requires the country to 
plan its own aid projects and lead implementation;

      Strict timelines for aid projects.

    These principles are critical to ensuring the long-term 
sustainability of projects once U.S. assistance concludes. 
Further, MCC's model is resulting in the ``MCC Effect,'' in 
which countries are independently making reforms in favor of 
good governance, economic freedom, and other MCC requirements, 
to qualify for a compact--and the effectiveness of this 
approach appeared early on. For example, in July 2007 the MCC 
signed a compact with Lesotho only after the country passed the 
Legal Capacity of Married Persons Act in 2006 that ensured 
married women, who had previously been legally categorized as 
minors, were granted basic economic, financial, and social 
rights.\64\ In 2010, USAID announced a reform agenda, USAID 
Forward, and claims to be in the process of adopting more 
accountable policy standards, country ownership, and 
timetables. Although some changes have been made to the 
agency's practices, success continues to remain elusive. MCC's 
model is more effective and efficient in delivering foreign 
aid. It also generates the most benefits for the taxpayer 
dollar. For these reasons, the committees of jurisdiction 
should consider making MCC the lead agency on foreign-
development assistance.
---------------------------------------------------------------------------
    \64\Millennium Challenge Corporation, ``One Step Closer to 
Achieving Gender Equality in Lesotho,'' 2013: https://www.mcc.gov/our-
impact/story/story-one-step-closer-to-achieving-gender-equality-in-
lesotho.

    International Religious Freedom. The United States should 
promote freedom of religion or belief around the world, given 
the importance of religious freedom to human rights, economic 
development, stability, and democracy. The independent U.S. 
Commission on International Religious Freedom [USCIRF] has 
provided important oversight and recommendations in this 
regard, including redirecting and conditioning aid. It calls 
for budget justifications to take into account the findings and 
recommendations of USCIRF. Additionally, the Office of 
International Religious Freedom continues to serve as an 
important voice on these issues in the State Department and 
should be supported.

                    OVERSEAS CONTINGENCY OPERATIONS/
                        GLOBAL WAR ON TERRORISM


                            Function Summary

    This category reflects non-enduring funding for the 
execution of Global War on Terrorism [GWOT] and other closely 
related activities, also known as Overseas Contingency 
Operations [OCO]. It provides funding for Department of Defense 
military operations and for the incremental civilian activities 
in Afghanistan, Pakistan, and Iraq led by the Department of 
State and the U.S. Agency for International Development 
[USAID]. The funding is entirely discretionary, with no direct 
spending components.
    The resolution calls for $73.7 billion in total budget 
authority and $38.5 billion in new outlays in fiscal year 2017 
for OCO/GWOT (shown in Function 970 in the summary tables). 
This funding level is consistent with the Bipartisan Budget Act 
of 2015. Due to the evolving nature of contingency operations, 
if the administration determines additional funds are needed to 
execute the war mission, the President should request 
supplemental funding as he deems necessary for these defense 
operations only.

                           Policy Assumptions

    Base Defense Requirements. Russian aggression and the 
growing threats of the Islamic State in the Middle East shape 
the parameters of an increasingly complex and challenging 
security environment. Out of the total OCO funding level of 
approximately $74 billion for fiscal year 2017, this resolution 
assumes $23 billion of these funds will be used for base 
defense requirements. Combined with the $551 billion in base 
National Defense funding (Function 050), the total spending 
level for base defense requirement needs for fiscal year 2017 
is $574 billion. This is consistent with the funding level 
provided in H. Con. Res. 27, the Concurrent Resolution on the 
Budget--Fiscal Year 2016.

    Budgeting for OCO. Funding provided in the OCO/GWOT budget, 
if enacted, will occur 16 years after the 9/11 terrorist 
attacks on the United States, which triggered wars in 
Afghanistan and Iraq. Consistent with the administration's 
plan, this budget supports phasing out the Overseas Contingency 
Operations/Global War on Terrorism designation for both defense 
and civilian programs, and assumes a transition to base budget 
funds in future years.

    OCO Transparency. All Federal program funding should be 
fully transparent and subject to agency accountability and 
congressional oversight. For both defense and civilian efforts 
in the frontline states funded with OCO monies, this budget 
supports full transparency of where the funds have been spent 
in the past, the present, and, if applicable, the future. The 
committees of jurisdiction have ably enforced such 
requirements, including section 1534 of the Fiscal Year 2016 
National Defense Authorization Act, which calls for a 
Comptroller General report on the use of OCO operation and 
maintenance funds for base requirements.\65\
---------------------------------------------------------------------------
    \65\The National Defense Authorization Act for Fiscal Year 2016, 
(Public Law 114-92), section 1534.
---------------------------------------------------------------------------

                     VETERANS BENEFITS AND SERVICES


                            Function Summary

    The Department of Veterans Affairs provides an array of 
benefits to veterans and their families, including disability 
compensation and pensions, education benefits, survivor 
benefits, medical treatment, life insurance, vocational 
rehabilitation, and burial and memorial benefits. The benefits 
are provided through three administrative agencies: the 
Veterans Health Administration, the Veterans Benefits 
Administration, and the National Cemetery Administration.
    The VA budget includes both discretionary and direct 
funding. Discretionary accounts fund medical care, medical 
research, construction programs, information technology, and 
general operating expenses, among other things. Direct spending 
accounts fund disability compensation, pensions, vocational 
rehabilitation and employment, education, life insurance, 
housing, and burial benefits, among other benefits and 
services.
    The budget resolution calls for $174.8 billion in total 
budget authority and $182.0 billion in total outlays in fiscal 
year 2017. Discretionary spending is $74.7 billion in budget 
authority and $74.7 billion in outlays in fiscal year 2017, 
about 4 percent higher than last year's levels for VA's 
discretionary budget. Direct spending in fiscal year 2017 is 
$100.0 billion in budget authority and $107.4 billion in 
outlays. The 10-year totals for budget authority and outlays 
are $2.0 trillion and $2.0 trillion, respectively. This 
resolution accommodates up to $66.4 billion for fiscal year 
2018 in discretionary advance appropriations for medical care, 
consistent with the Veterans Health Care Budget and Reform 
Transparency Act of 2009.

            A Culture of Mismanagement and Wasteful Spending

    For years, the Department of Veterans Affairs [VA] has been 
plagued with problems in health care delivery, business 
processes, and performance across the country. These are the 
products of growing bureaucratic mismanagement, in addition to 
leadership and staffing failures. In 2015, the Government 
Accountability Office added both VA health care and information 
technology acquisitions to their High-Risk List, which calls 
attention to ``agencies and program areas that are high risk 
due to their vulnerability to fraud, waste, abuse, and 
mismanagement, or are most in need of transformation.''\66\
---------------------------------------------------------------------------
    \66\Government Accountability Office, High-Risk Series: An Update, 
February 2015.
---------------------------------------------------------------------------
    The following examples highlight why GAO views the VA as 
high risk.

      VA Medical Construction Projects. The Department 
of Veterans Affairs medical center in Aurora, Colorado cost 
taxpayers $1.7 billion in 2015, more than $1 billion over 
budget.\67,68\ According to an April 2013 GAO report, ``VA's 
largest medical center construction cost increases ranged from 
59 percent to 144 percent, with a total cost increase of nearly 
$1.5 billion and an average increase of approximately $366 
million per project. The schedule delays ranged from 14 to 74 
months with an average of 35 months per project.''\69\
---------------------------------------------------------------------------
    \67\Ibid.
    \68\``Cost of Aurora veteran's hospital leaps to $1.73 billion,'' 
The Denver Post, 18 March 2015: http://www.denverpost.com/news/
ci_27730588/cost-aurora-veterans-hospital-leaps-1-73-billion; and 
``VA's Colorado hospital has a `shocking' sticker price: $1.7 billion. 
Yes, billion,'' The Washington Post, 18 March 2015: https://
www.washingtonpost.com/news/federal-eye/wp/2015/03/18/vas-colorado-
hospital-has-a-shocking-sticker-1-7-billion-yes-billion/.
    \69\Government Accountability Office, VA Construction Additional 
Actions Needed to Decrease Delays and Lower Costs of Major Medical-
Facility Projects, April 2013: http://www.gao.gov/assets/660/
653585.pdf.

      VA Information Technology Systems. In 2015, the 
VA Inspector General highlighted VA information technology [IT] 
systems development--of which the Veterans Benefit Management 
System [VBMS] is a component--as a ``long-standing high-risk 
challenge, susceptible to cost overruns, delays, performance 
problems, and, in some cases, complete project failures.''\70\ 
The Veterans Benefits Administration [VBA] reported it has made 
progress in reducing the backlog claims through VBMS; 
nevertheless, recent audits and reports contradicted that claim 
and did not attribute the decrease in backlogs specifically to 
VBMS. Further, the VBMS budget increased from $580 million in 
2009 to $1.3 billion in 2015, with no end in sight. Even with a 
122-percent increase in funding to end the backlog, VBMS 
continues to fail in providing needed services.
---------------------------------------------------------------------------
    \70\VA Office of Inspector General, Department of Veterans Affairs 
Follow-up Review of the Veterans Benefits Management System, 14 
September 2015: http://www.va.gov/oig/pubs/VAOIG-13-00690-455.pdf.

      Contract Regulation Noncompliance. In 2015, a 35-
page document addressed to VA Secretary McDonald detailed how 
VA officials made $6 billion in medical supply purchases that 
were in direct violation of Federal contracting rules.\71\ The 
document also described a culture of lawlessness and chaos at 
the Veterans Health Administration [VHA]. The VA's failure to 
abide by Federal contracting regulations makes taxpayer dollars 
more susceptible to fraud, waste, and abuse and is 
unacceptable.
---------------------------------------------------------------------------
    \71\``Senator asks VA Chief about `continuing culture of chaos' 
that fails veterans,'' The Washington Post, 22 June 2015: https://
www.washingtonpost.com/news/federal-eye/wp/2015/06/22/senator-to-va-
chief-what-are-you-doing-to-address-continuing-culture-of-chaos-that-
fails-our-veterans/.
---------------------------------------------------------------------------

                            The Way Forward

    VA needs to adopt a new way of thinking to address its most 
challenging problems, such as ensuring access to health care, 
quality and delivery of programs, and cost management. All 
programs should maximize net benefits, and be cost- and target-
efficient.
    All VA programs vulnerable to significant moral hazard 
should require adequate cost sharing to assure that 
beneficiaries commit enough of their own resources to act 
responsibly, with amounts scaled to what they can afford. 
Reducing moral hazard on the part of government agencies and 
program beneficiaries is one of many ways to improve VA 
programs.\72\ Last, Congress should require any VA rule or 
regulation with an annual economic impact of $100 million or 
more to come before Congress for an up-or-down vote before that 
rule or regulation takes effect.\73\
---------------------------------------------------------------------------
    \72\Peter H. Schuck, Why Government Fails So Often and How It Can 
Do Better, 2014.
    \73\Neil Siefring, ``The REINS Act will keep regulations and their 
costs in check,'' The Hill. 16 February 2016: http://thehill.com/blogs/
pundits-blog/economy-budget/250178-the-reins-act-will-keep-regulations-
and-their-costs-in; and Passage of H.R. 427 (H. Rept. 114-214), the 
Regulations from the Executive in Need of Scrutiny Act of 2015 (REINS 
Act), (H.R. 427, H. Rept. 114-214): https://www.congress.gov/bill/
114th-congress/house-bill/427.
---------------------------------------------------------------------------
    VA should conduct a thorough analysis to sort out and 
reassess its missions based on their importance, difficulty, 
and past success. VA leaders can achieve this by thinning out 
the bureaucracy by, among other things, reducing the number of 
layers between top and bottom employees; reducing the number of 
managers; accelerating the hiring and appointments processes 
(working alongside the Congress where appropriate); 
streamlining the disciplinary process; refining performance 
measure metrics; and strengthening oversight and contract 
administration of government private employee contracts.\74\
---------------------------------------------------------------------------
    \74\Schuck, op. cit.
---------------------------------------------------------------------------
    The agency also needs personnel reforms. VA's workforce is 
in serious crisis, experiencing a long-term decline in quality, 
accountability, vision, energy, and professional commitment. No 
organization or Federal agency can function effectively without 
maintaining an effective workforce--and that includes 
disciplining employees when necessary. At the VA, however, it 
is nearly impossible to fire, demote, or suspend staff members 
(civil servants and Senior Executive Service [SES]).\75\ The 
Veterans Committee Chairman remains a strong advocate of 
providing the VA with authority to take such actions when 
justified.
---------------------------------------------------------------------------
    \75\Ibid.
---------------------------------------------------------------------------
    Another way to hold SES and supervisors accountable is to 
change the positions from the General Schedule to a GG schedule 
(excepted service). Within the intelligence community, each 
intelligence organization (i.e., the Defense Intelligence 
Agency, the National Geospatial-Intelligence Agency, the 
National Security Agency, and the National Reconnaissance 
Office) uses the GG schedule that enables the agencies to 
dismiss employees that do not meet performance goals.
    Without these steps, the consequences will be an 
increasingly demoralized, poorly equipped, and undisciplined VA 
workforce. These VA civil servants and Senior Executive Service 
employees are, after all, the implementers and ultimate 
instruments of the VA's policies, and if they are not up to the 
job, then neither is the VA.
    As Congress continues to operate under statutory spending 
caps, all agency budget submissions should receive 
congressional scrutiny to ensure that every taxpayer dollar 
requested is thoroughly justified and used effectively and 
efficiently. Exposing funds to mismanagement is not an option 
during times of fiscal restraint. Moreover, continuing to throw 
more money at a dysfunctional agency that refuses to be 
transparent and accountable, without significant reforms, is a 
disservice to all veterans and the public.

                      Illustrative Policy Options

    While specific policy decisions will fall to the Committee 
on Veterans' Affairs and the Appropriations Subcommittee on 
Military Construction, Veterans Affairs, and Related Agencies, 
the following options reflect ways to apply the principles 
described above.

                         DISCRETIONARY SPENDING

    Limit Awards and Bonuses. In 2014, the Department of 
Veterans Affairs awarded more than $142 million in cash 
bonuses, in addition to $276 million for items including 
retention and relocation payments and rewards for saving money 
on travel and inventive ideas.\76\ Incredibly, the VA 
leadership made these awards the same year that the VA's health 
scandal denied veterans access to VA health care. Committee on 
Veterans' Affairs Chairman Miller has been spearheading VA 
bonus reform and warned: ``Until VA leaders learn this 
important lesson and make a commitment to support real 
accountability at the Department, efforts to reform VA are 
doomed to fail.''\77\ This budget option calls for reducing the 
aggregate amount of awards and bonuses paid to VA employees by 
30 percent. This option was also included in the House-passed 
H.R. 294 Long-Term Care Veterans Choice Act with bipartisan 
support.\78\
---------------------------------------------------------------------------
    \76\Martin Matishak, ``Still Mired in Scandal, VA Awards $142 
Million in Bonuses,'' The Fiscal Times, 11 November 2015: http://
www.thefiscaltimes.com/2015/11/11/Still-Mired-Scandal-VA-Awards-142-
Million-Bonuses; Donovan Slack and Bill Theobald, ``Veterans Affairs 
pays $142 million in bonuses amid scandals,''. USA Today, 11 November 
2015: http://www.usatoday.com/story/news/politics/2015/11/11/veterans-
affairs-pays-142-million-bonuses-amid-scandals/75537586/; Anna 
Giaritelli, ``VA gave 156,000 employees $142 million bonuses in 2014,'' 
the Washington Examiner, 11 November 2015: http://
www.washingtonexaminer.com/va-gave-156000-employees-142-million-in-
bonuses-in-2014/article/2576155.
    \77\Rep. Jeff Miller, Miller Newsletter, 15 November 2015:
    http://jeffmiller.house.gov/news/email/
show.aspx?ID=Z5MPA3CVK5FYYORBX7RZEZH4KM
    \78\Congressional Budget Office cost estimate for H.R. 294, the 
Long-Term Care veterans Choice Act, 2 March 2015: https://www.cbo.gov/
sites/default/files/114th-congress-2015-2016/costestimate/hr2940.pdf.

    Consolidate VA's Transition Assistance Program Goals, 
Plans, Success Program with Other Federal Agencies. Redundant 
Federal programs are leading to million, if not billions, in 
wasteful spending. At a time of increased budget pressure, 
American taxpayers cannot afford to keep buying the same 
service twice. The Transition Assistance Program Goals, Plans, 
Success Program [TAP GPS] is designed to facilitate service 
members' transition to civilian life and is governed by a 
working group from the Departments of Defense, Education, and 
Labor [DOL], the Small Business Administration, and the Office 
of Personnel Management. The working group designs the 
curriculum composed of a 5-day core class focused on job 
hunting skills and VA benefits plus the optional 2-day course 
focused on education, small business, and trades training. TAP 
GPS is taught largely by contractors hired by DOL and VA. 
Unfortunately, instead of combining the training curricula 
requirements into one overarching contract, VA and DOL have 
awarded separate contracts, thus doubling the overhead costs. 
Additionally, VBA leaders have shifted TAP GPS funding to cover 
the costs of other VA non-statutory job placement programs 
unrelated to the statutory TAP GPS program. This option would 
consolidate duplicative VA and DOL transition programs to 
---------------------------------------------------------------------------
achieve greater service member and veteran transition results.

    Establish Accountability Standards for the Veterans 
Benefits Management System. In 2009, VBA initiated efforts to 
address the disability claims backlog by modernizing the way it 
receives and processes benefits claims. The VBA proposed a 
multi-pronged transformation to retrain, reorganize, and 
streamline business processes, in addition to building and 
implementing technology solutions including the Veterans 
Benefits Management System [VBMS]. The intent of transitioning 
to a paperless claims process is to enable a more efficient 
workflow by reducing processing time and minimizing rating 
inconsistencies and errors.
    According to the Committee on Veterans' Affairs, VBMS 
suffers from a range of program problems including inadequate 
cost control, unplanned changes in system and business 
requirements, inefficient contracting practices, and lack of a 
concrete plan to decommission redundant legacy systems.\79\ 
VBMS Program Management Office reports significant increases of 
VBMS life-cycle costs from $580 million in September 2009 to 
about $1.5 billion in January 2015.\80\ As a result, the VA 
cannot ensure an effective return on its investment to 
taxpayers and the total VBMS system development cost remains 
unknown. The VA needs to properly address the above problems if 
it is to decrease the disability claims backlog. Until the VBA 
and the VA's Office of Information Technology are able to 
deliver a reasonable and cost-efficient path forward, including 
an objective and true scope of milestones and progress, VBMS 
resources should be frozen at current levels. This budget 
option would freeze current funding levels for VBMS until the 
VA successfully creates benchmarks that would ensure proper 
progress, good governance, and efficient spending on this 
program.
---------------------------------------------------------------------------
    \79\Committee on Veterans' Affairs, U.S. House of Representatives, 
Fiscal Year 2017 Views and Estimates, 5 February 2015.
    \80\VA Office of Inspector General, Department of Veterans Affairs: 
Follow-up Review of the Veterans Benefits Management System, 14 
September 2015: http://www.va.gov/oig/pubs/VAOIG-13-00690-455.pdf.

    Allow Veterans to Deposit Disability Compensation into the 
Thrift Savings Plan. Similar to a civilian 401k plan, the 
Thrift Savings Plan [TSP] is a government-sponsored retirement 
program that allows Federal employees and military personnel to 
save money for retirement. Once separated from military 
service, veterans are unable to continue contributions into 
their TSP accounts unless employed by the Federal 
Government.\81\ Many non-retired veterans face obstacles that 
may delay--or prevent--financial success. According to a 2014 
National Foundation for Credit Counseling survey, service 
members are more likely to rely or misuse credit cards than 
their civilian counterparts leading to higher debt when they 
transition out of the military.\82\ The survey also found 77 
percent of service members worry about lack of savings to cover 
unexpected expenses, cover retirement, and being able to make 
debt payments on time.\83\ This option would allow non-retired 
veterans the opportunity to invest their disability 
compensation into a TSP account, providing these individuals an 
opportunity to plan for their future retirement.\84\ All 
veterans, not just retirees, should have access to the TSP 
benefit.
---------------------------------------------------------------------------
    \81\David Goldich, ``Substance Over Sound Bite: Better Veterans 
Policy In The NDAA,'' 1 October 2015: http://warontherocks.com/2015/10/
substance-over-sound-bite-better-veterans-policy-in-the-ndaa/.
    \82\Harris Poll, A Survey about Financial Literacy Among the U.S. 
Military, .The survey reflects service members concerns prior to their 
transition to veteran status. Poll, Harris (2014). A Survey about 
Financial Literacy Among the U.S. Military, prepared for The National 
Foundation for Credit Counseling, undated: https://www.nfcc.org/wp-
content/uploads/2013/06/
NFCC_Pioneer_Military_Survey_DATASHEET_and_KEY_FINDINGS_0517141.pdf
    \83\Ibid.
    \84\Goldich, op. cit.

    Improve Oversight of Certain Contractual Arrangements. 
According to a 2015 GAO report to the Chairman of the Veterans' 
Affairs Subcommittee on Oversight and Investigations, the VA 
could not produce proper documentation identifying the extent 
to which it used interagency contracts for services provided by 
another agency in fiscal years 2012 through 2014.\85\ While the 
VA claims it obligated about $1.7 billion to other government 
agencies between fiscal years 2012 through 2014,\86\ GAO's 
analysis of VA's accounting system data found the total amount 
transferred over the same time period was between $2.3 billion 
and $2.6 billion, a difference of $600 million to $900 
million.\87\ These inconsistences place the VA resources at 
risk of fraud, waste, and abuse. The GAO report found 
documentation from the VA's contract management and accounting 
systems were incomplete and the VA's management of contract 
awards lacked justification for granting interagency contracts. 
This option would require the VA to reconcile data between the 
contract management and accounting systems, review interagency 
contracts, and ensure all interagency contracts are properly 
reviewed and documented in both systems.
---------------------------------------------------------------------------
    \85\Government Accountability Office, Veterans Affairs Contracting: 
Improved Oversight Needed for Certain Contractual Arrangements, July 
2015: http://gao.gov/assets/680/671116.pdf.
    \86\Ibid.
    \87\Ibid.
---------------------------------------------------------------------------

                            DIRECT SPENDING

    Modify Housing Stipend Paid to Children Who Use Transferred 
Post-9/11 GI Bill Education Benefits. The GI Bill's primary use 
is assisting a veteran's reintegration into civilian life by 
providing the education and skills necessary to gain meaningful 
employment after military service. To provide both a recruiting 
and retention incentive, the Post-9/11 GI Bill allows each 
military service to determine which service members who meet 
the statutory eligibility requirements to transfer all or some 
of their education benefits to their dependents. Instead of 
targeting the benefit to retain service members with critically 
needed skills, the services have made eligible all service 
members who qualify under the time-in-service requirements. 
Notably, the Military Compensation and Retirement Modernization 
Commission suggested eliminating the housing stipend paid to 
children. This option would revert the Post-9/11 GI Bill back 
to its original intent by focusing resources on veterans 
readjusting into society post military career.

    Prevent VA from Providing Unlimited Amounts for Flight 
Training at Public Schools. Brought to Congress' attention by 
the VA, Veterans Service Organizations [VSOs], and the National 
Association of State Approving Agencies [NASAA], some flight 
schools are exploiting an aviation training tuition loophole in 
the Post-9/11 GI Bill.\88\ Some institutions of higher learning 
have applied extreme costs for flight fees as there are no caps 
in place for such institutions with third-party flight 
contractors. According to representatives from NASAA, some 
student veterans are taking flight classes as electives with no 
cost cap for flight fees.\89\ In response to concerns from 
stakeholders regarding this loophole, the Chairman of the 
Veterans' Affairs Subcommittee on Economic Opportunity 
introduced legislation grandfathering current flight school 
students' tuition for 2 years and making improvements to 
veterans' educational assistance. In 2016, the measure passed 
the House on a bipartisan basis. This option reflects the 
provision in the legislation that applies a tuition cap for 
flight programs at public institutions of higher learning that 
is consistent with other veterans' educational programs.\90\ A 
similar option was also included in the President's fiscal year 
2017 budget request.
---------------------------------------------------------------------------
    \88\Curtis L. Coy, Deputy Under Secretary for Economic Opportunity, 
Veterans Benefit Administration, testimony before the House Veterans' 
Affairs Subcommittee on Economic Opportunity, 19 November 2014: https:/
/veterans.house.gov/witness-testimony/mr-curtis-l-coy-7. The Iraq and 
Afghanistan Veterans of America, the American Legion, and the Veterans 
of Foreign Wars all support closing this loophole.
    \89\Ibid.
    \90\The Veterans Employment, Education, and Healthcare Improvement 
Act (H.R. 3016): https://www.congress.gov/bill/114th-congress/house-
bill/3016/text.

    Round Down Annual Cost-of-Living Allowance to the Next 
Lower Whole Dollar. This option would require VA to round down 
increases in the monthly compensation rate resulting from an 
annual cost-of-living adjustment [COLA] to the next lower whole 
dollar. The VA would apply this round down to both disability 
compensation and dependency and indemnity compensation 
payments. A similar requirement expired at the end of 2013 and 
this option would reinstate this policy. It has also been 
---------------------------------------------------------------------------
included in the President's requests for the past 5 years.

    Reconcile and Properly Manage Concurrent VA and Military 
Drill Compensation. Under statute, reservists and National 
Guard members are prohibited from receiving VA compensation or 
pension benefits and military drill pay concurrently.\91\ 
According to a 2014 VA Inspector General's report: ``VA did not 
process VA benefit offsets to disability compensation benefits 
in a timely manner when reservists earned drill pay 
concurrently during fiscal years 2011 and 2012.'' The report 
also found VBA's VA compensation and military drill 
unprocessing rates for fiscal years 2011 and 2012 were not 
significantly different from a similar 1997 VA Inspector 
General's audit. Therefore, it is likely the VBA has not 
processed offsetting claims since 1997.\92\ This budget option 
calls for immediate recovery of all offsets from previous 
fiscal years in addition to enhanced oversight to ensure the VA 
follows the law and collects drill pay offsets in a timely 
manner.
---------------------------------------------------------------------------
    \91\Title 10--Armed Forces, Subtitle E--Reserve Components, Part II 
Personnel Generally, Chapter 1209--Active Duty, Sec. 12316--Payment of 
certain Reserves while on duty: https://www.gpo.gov/fdsys/granule/
USCODE-2011-title10/USCODE-2011-title10-subtitleE-partII-chap1209-
sec12316, and Title 38, Veterans' Benefits, Part IV--General 
Administrative Provisions, Chapter 53--Special provisions relating to 
benefits, section. 5304, Prohibition against duplication of benefits.
    \92\VA Office of Inspector General, Veterans Benefits 
Administration: Audit of the Management of Concurrent VA and Military 
Drill Pay Compensation, 3 June 2014: http://www.va.gov/oig/pubs/VAOIG-
13-02129-177.pdf.

    Reconcile Post-9/11 GI Bill Monthly Housing Allowance and 
Book Stipend Payments. The size of the current Post-9/11 GI 
Bill program and its associated financial risks are of great 
concern. In 2013, VBA paid about $5.4 billion in housing 
allowances and book stipends to approximately 789,000 students. 
The VA's Inspector General found about $41 million in improper 
or inaccurate payments.\93\ This option would require Congress 
to align education service recovery procedures with Federal 
regulations, and require the VA to review and reconcile book 
stipend collection procedures, and collect outstanding improper 
payments.
---------------------------------------------------------------------------
    \93\VA Office of Inspector General, Veterans Benefits 
Administration: Audit of Post-9/11 G.I. Bill Monthly Housing Allowance 
and Book Stipend Payments, 11 July 2014: http://www.va.gov/oig/pubs/
VAOIG-13-01452-214.pdf.

    Temporarily Reduce VA Reporting Fees to Postsecondary 
Education Institutions. The VA pays schools a reporting fee 
based on the number of students receiving VA educational 
benefits. Title 38 U.S. Code Sec. 3684 mandates that reporting 
fees must be used for the purpose of certifications or 
otherwise supporting programs for veterans.\94\ The usage and 
application of reporting fees has been less and less 
scrutinized. Many institutions have used the reporting fees as 
an offset to their overall budget and personal staff salaries. 
This option would require the VA to verify proper usage of 
reporting fees during every compliance survey and audit. This 
option was also included in Senate-passed legislation, with 
bipartisan support.\95\
---------------------------------------------------------------------------
    \94\Title 38--United States Code Veterans' Benefits (Public Law 
112-7), Sec. 3684:
    https://veterans.house.gov/sites/republicans.veterans.house.gov/
files/documents/Title%2038-SCRAPrint3.pdf.
    \95\Congressional Budget Office, Cost Estimate for S. 1203 the 21st 
Century Veterans Benefits Delivery and Other Improvements Act, 1 
October 2015:
    https://www.cbo.gov/sites/default/files/114th-congress-2015-2016/
costestimate/s1203.pdf.

    Recover Post-9/11 GI Bill Education Overpayments. VA 
provided $11 billion in Post-9/11 GI Bill education benefits to 
almost 800,000 veterans in fiscal year 2015.\96\ According to a 
GAO report in 2015: ``VA identified $416 million in Post-9/11 
GI Bill overpayments in fiscal year 2014, affecting 
approximately one in four veteran beneficiaries and about 6,000 
postsecondary institutions of higher education.'' The VA was 
able to recover $264 million, but has still failed to collect 
the remaining $152 million in overpayments from fiscal year 
2014, and an additional $110 million from prior years.\97\ This 
option would require VA to do the following: (1) recover Post-
9/11 GI Bill education overpayments; (2) address overpayments 
to student veterans and institutions of higher learning; and 
(3) improve its notification process with student veterans and 
those institutions.
---------------------------------------------------------------------------
    \96\Government Accountability Office, Post-9/11 G.I. Bill: 
Additional Actions Needed to Help Reduce Overpayments and Increase 
Collections, October 2015: http://www.gao.gov/assets/680/673230.pdf.
    \97\Ibid.

    Reinstate Eligibility Verification Reports for Pension 
Benefits. In December 2012, VBA officials discontinued 
requesting eligibility verification reports [EVRs]. Under this 
change, veterans and beneficiaries do not have to submit an 
annual EVR to prove eligibility and continue receiving pension 
payments.\98\ Eliminating EVRs represents a serious risk to VA 
that it will not receive changes that affect eligibility. This 
option would require VA to implement Pension and Fiduciary 
Service procedures that confirm veteran and beneficiary 
eligibility, and implement a plan to reduce the amount of 
overpayments due to the changes in income and dependency 
status.\99\
---------------------------------------------------------------------------
    \98\VA Office of Inspector General, Veterans Benefits 
Administration: Audit of Pension Payments, 4 September 2013: http://
www.va.gov/oig/pubs/VAOIG-12-00181-299.pdf; and Department of Veterans 
Affairs Office of Inspector General (2015). Semiannual Report to 
Congress Issue 74/1 April--30 September 2015: http://www.va.gov/oig/
pubs/VAOIG-12-00181-299.pdf.
    \99\Ibid.

    Review All Temporary 100-Percent Disability Evaluations. 
According to a 2014 Inspector General's report, the Veterans 
Benefits Administration has not correctly assessed and 
monitored 100-percent disability evaluations, and failed to 
ensure each temporary 100-percent evaluation had a future 
examination date in the veteran's record. In addition, the 
report estimates the VBA paid more than $85 million in improper 
disability compensation benefits without medical evidence. The 
VBA's continued failure to conduct timely reviews of these 
evaluations will result to an estimated $222.6 million in 
unsupported payments over the next 5 years.\100\ This option 
calls for Congress to change regulations and require the VA to 
monitor temporary 100-percent disability evaluations and allow 
it to recover payments made in error.
---------------------------------------------------------------------------
    \100\VA Office of Inspector General, Veterans Benefits 
Administration: Follow-up Audit of 100 Percent Disability Evaluations, 
6 June 2014: http://www.va.gov/oig/pubs/VAOIG-14-01686-185.pdf.
---------------------------------------------------------------------------

                       ADMINISTRATION OF JUSTICE


                            Function Summary

    In the 15 years since 9-11, Americans have grown accustomed 
to living in an environment of enhanced security. Airports, 
government buildings, major sporting venues, and myriad other 
public facilities now feature the instruments of vigilance that 
have become necessarily common. Yet despite these measures, 
terrorism continues to lurk in the shadows, striking out all 
too unexpectedly--as demonstrated in Boston, Paris, and San 
Bernardino. The President's relatively sanguine attitude--
describing Al Qaeda as ``decimated'' and dismissing the brutal 
Islamic State as a ``jay-vee'' team--does not help. The threat 
of further terrorist acts on America's homeland remains.
    The answer does not lie in throwing more money at the 
challenge. The ongoing risk of domestic terrorism, and the 
tidal wave of government debt, call for better targeting of 
Federal law enforcement funds. Federal tax dollars for the 
Departments of Justice and Homeland Security should be focused 
on administering justice, arresting and prosecuting terrorists, 
protecting and securing the Nation's borders, investigating 
Federal crimes, and seeking punishment for those guilty of 
unlawful behavior. Local law enforcement, in contrast, is the 
responsibility of the States and local communities, and they 
should determine the best course of action in deterring 
localized crime.
    In 2015, more than $2 billion in discretionary grants were 
disbursed by the Department of Justice [DOJ] from three 
sources: Community Oriented Policing Services, the Office of 
Justice Programs, and the Office on Violence Against Women. The 
GAO reported in 2012 that many of DOJ's some 11,000 annual 
grants are awarded without consideration of overlap or 
duplication with other grant programs, and that DOJ should 
better target its grants. GAO's 2015 update of that report 
states that DOJ has only partially addressed this area of 
potential duplication.\101\ According to the President's fiscal 
year 2017 budget, Washington will award $7.2 billion in total 
justice and homeland security grants in fiscal year 2016 to 
State and local governments. The administration needs clear 
guidance from Congress in facing the Nation's continuing 
security threats. Furthermore, it is not the function of the 
Federal Government to finance State and local governments. 
Federal law enforcement needs to focus on its core 
responsibilities.
---------------------------------------------------------------------------
    \101\Government Accountability Office, 2015 Annual Report: 
Additional Opportunities to Reduce Fragmentation, Overlap, and 
Duplication and Achieve Other Financial Benefits, April 2015, p. 209: 
http://www.gao.gov/assets/670/669613.pdf.
---------------------------------------------------------------------------
    The principal activities in this category (Function 750 in 
the summary tables) include Federal law enforcement programs, 
litigation and judicial activities, correctional operations, 
and border security. The function includes most of the 
Department of Justice and several components of the Department 
of Homeland Security [DHS]. Other agencies funded here include 
the Federal Bureau of Investigation [FBI]; the Drug Enforcement 
Administration; the Bureau of Alcohol, Tobacco, Firearms and 
Explosives; the United States Attorneys; legal divisions within 
the Department of Justice; the Legal Services Corporation; the 
Federal Judiciary; and the Federal Bureau of Prisons.
    The vast majority of this category's funding is 
discretionary, provided by the Appropriations Subcommittees on 
Commerce, Justice, Science and Related Activities, and Homeland 
Security. The Committee on the Judiciary and the Committee on 
Homeland Security have the main authorizing duties. The 
resolution calls for $55.0 billion in discretionary budget 
authority and $54.9 billion in outlays for fiscal year 2017. 
The small amount of direct spending in the category--which 
funds certain immigration activities, the Crime Victims Fund, 
the Assets Forfeiture Fund, and the Treasury Forfeiture Fund, 
among others--totals $9.5 billion in budget authority and $3.8 
billion in outlays. The 10-year totals for the function are 
$653.1 billion in budget authority and $653.2 billion in 
outlays.

                      Illustrative Policy Options

    In developing policies to meet their budget targets, the 
committees of jurisdiction cited above should give priority to 
those activities that are essential for the Federal Government. 
This does not necessarily require more funding in each area; it 
means addressing those Federal responsibilities first. The 
proposals below indicate policy options that the committees 
might consider.

                         DISCRETIONARY SPENDING

    Consolidate Justice Grants. In fiscal year 2015, DOJ 
awarded nearly $4.7 billion in total grants to conduct 
research, provide training assistance, and support the State 
and local criminal justice system. The Congressional Research 
Service and GAO have identified overlap and duplication within 
many of these grant programs, and it is clear that they fund 
law enforcement activities that are primarily State and local 
responsibilities. In addition, Federal grants should not be 
awarded to State and local law enforcement agencies unless they 
comply with the Federal law. This includes jurisdictions that 
refuse to honor Federal detainers, harbor illegal aliens, or 
fail to share information on criminal illegal aliens. This 
option streamlines grants into three categories--first 
responders, law enforcement, and victims--while eliminating 
waste, inefficiency, and bureaucracy.

    Eliminate Unnecessary Headquarters and Construction Funding 
for DHS, DOJ, and the Judiciary. Construction funding for 
various agencies within this budget function have increased 
without due oversight and cost-benefit analysis, though the 
committees of jurisdiction have focused on addressing cost 
overruns and increasing accountability. This budget recommends 
reducing DHS and DOJ construction budgets by 15 percent to rein 
in unnecessary construction projects, while exempting those 
agencies involved with border security and immigration 
enforcement. The budget recommends additional scrutiny of cost 
overruns of DHS's St. Elizabeth's project, the largest Federal 
building project in the District of Columbia since the 
Pentagon. Additionally, no funding should be provided for the 
Office of Public Advocate, or any similar or successor 
position, in Immigration and Customs Enforcement. The 
President's fiscal year 2017 budget request includes $1.4 
billion to build a new FBI headquarters, along with the $390.0 
million already provided in the current year's budget. This 
budget questions such a request, given the current, fiscally 
constrained environment.

    Eliminate the Legal Services Corporation. It is the duty of 
State and local governments to provide legal services to those 
individuals unable to provide it for themselves. Local 
jurisdictions are more aware of their citizens' needs and can 
provide more responsive service than the Federal Government. 
Critics have argued that despite restrictions already in place, 
the Legal Services Corporation too often focuses on social 
activist causes rather than advocating for those persons 
needing legal help the most.

                            DIRECT SPENDING

    Permanently Extend Customs User Fees. Continuing the policy 
of the Emergency Unemployment Compensation Extension Act of 
2014, the budget assumes the Bureau of Customs and Border 
Protection continues to collect customs user fees through 
fiscal year 2026, the last year of the budget window. With the 
passage of the Emergency Unemployment Compensation Extension 
Act of 2014, authority to collect these fees expires in 2024. 
The Bipartisan Budget Agreement of 2015 extended customs user 
fee collections through 2025. This budget recommends making 
these customs user fees permanent.

                           GENERAL GOVERNMENT


                            Function Summary

    A government that seeks greater efficiency in its programs 
should demand no less from its own operations. Yet this has not 
been the case with many of the Federal Government's agencies. 
Funding in the category of General Government (Function 800 in 
the summary tables) has increased by roughly 30 percent since 
fiscal year 2007, but no one would contend the additional 
resources have produced a smooth, businesslike operation. The 
budget resolution aims to eliminate identified waste across all 
Federal Government branches and agencies. If a program or 
activity is poorly targeted, ineffective, duplicative of other 
efforts, or could be better performed by the private sector, it 
merits consideration for elimination or restructuring by the 
committees of jurisdiction.
    This category mainly provides funding for the Legislative 
and Executive Branches of the Federal Government. On the 
legislative side, these funds support the operations of 
Congress, including the Congressional Budget Office, the 
Library of Congress, and the Government Accountability Office. 
In the Executive Branch, the category finances the Executive 
Office of the President, including the Office of Management and 
Budget, the Council on Environmental Quality, White House 
salaries, and White House building repair; general tax 
administration and fiscal operations of the Department of the 
Treasury (including the Internal Revenue Service); the Office 
of Personnel Management; the real-property and personnel costs 
of the General Services Administration; general-purpose fiscal 
assistance to States, localities, the District of Columbia, and 
U.S. territories; and other general government activities.
    Most of this funding comes through annual appropriations 
(discretionary spending), which in fiscal year 2017 totals 
$15.7 billion in budget authority and $15.2 billion in outlays. 
Budget authority for direct spending in this area will total 
$7.6 billion, with $7.6 billion in accompanying outlays. Over 
10 years, the budget anticipates $232.3 billion in total budget 
authority and $228.5 billion in outlays.

           Illustrative Discretionary Spending Policy Options

    While specific policy options will be determined by the 
committees of jurisdiction--which include the Committees on 
Transportation and Infrastructure, House Administration, Ways 
and Means, Natural Resources, Oversight and Government Reform--
the discussion above offers practical guidelines they might 
follow. Some potential examples are presented below. Funding 
for Federal operations and mismanagement of properties are just 
a few areas where savings should be achieved. Some other 
potential examples are presented below. This resolution also 
urges the Office of Management and Budget and relevant agencies 
to make a top priority of implementing the data aggregation and 
transparency initiatives in the Digital Accountability and 
Transparency Act.
    Some specific options worthy of consideration are described 
below.

    Decrease Costs of the Government Printing Office by 
Increasing the Use of Electronic Copies. The Government 
Printing Office [GPO] prints thousands of pages of government 
documents each year--most of which have gained a ubiquitous 
online presence. Federal departments and agencies, for example, 
maintain their key budget documents, reports, and data online 
and available to the public. This resolution supports greater 
selectivity in the material GPO prints, allowing users to rely 
more heavily on increased electronic access to materials. It is 
consistent with recommendations to establish a sustainable 
business model for GPO and continue meeting demands to make 
information available in a digital age.\102\
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    \102\National Academy of Public Administration, Rebooting the 
Government Printing Office: Keeping America Informed in the Digital 
Age, January 2013: https://www.gpo.gov/pdfs/about/
GPO_NAPA_Report_FINAL.pdf.

    Terminate the Election Assistance Commission. This 
independent agency was created in 2002 as part of the Help 
America Vote Act to provide grants to States to modernize 
voting equipment. Its mission has been fulfilled. The National 
Association of Secretaries of State, the association of State 
officials responsible for administering elections, has passed 
resolutions stating the Election Assistance Commission [EAC] 
has served its purpose, and funding is no longer necessary. The 
EAC should be eliminated and any valuable residual functions 
---------------------------------------------------------------------------
should be transferred to the Federal Election Commission.

    Accompany Pro-Growth Tax Reform with Responsible Reductions 
to the Internal Revenue Service. The Internal Revenue Service 
[IRS] has more than 90,000 employees and spends in excess of 
$11 billion annually. Additionally, the Internal Revenue Code 
now contains approximately four million words, and each year 
taxpayers and businesses spend more than six billion hours 
complying with filing requirements.\103\ The investigation 
related to the IRS targeting American citizens demonstrates 
that the massive budget has not resulted in the IRS serving 
taxpayers better; rather, it has created a bloated bureaucracy 
filled with inefficiency and abuse.
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    \103\National Taxpayer Advocate, 2013 Annual Report to Congress, 
December 2013.
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    The President's budget makes the tax code more complex and 
proposes to increase the IRS budget. This resolution calls for 
simplifying the burdensome tax code through tax reform (see the 
Revenue and Tax Reform section of this report), naturally 
reducing the agency's size by promoting policies that lead to 
less reliance on the IRS. As outlined in a 2012 Government 
Accountability Office report, simplifying the tax code may 
reduce accidental errors in tax filing and improve voluntarily 
compliance.\104\ A simplified tax code would have the dual 
benefits of reducing both the time taxpayers devote to 
complying with an overly complex code, and the taxpayer dollars 
needed to administer and enforce it.
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    \104\Government Accountability Office, Opportunities to Improve the 
Taxpayer Experience and Voluntary Compliance, April 2012.

    Scale Back Funding to the Legislative and Executive 
Branches. The budget for the House of Representatives today is 
$188 billion less than it was when Republicans assumed the 
majority in 2011. This budget resolution aims to scale back 
government wherever it has expanded needlessly or beyond its 
proper role. That includes within government operations and 
offices themselves. It also could include reforms such as 
scaling back pensions of former U.S. presidents--recognizing 
their ability to support themselves primarily through other 
means of employment--while providing for their security and 
pensions for any surviving spouses. The resolution recommends 
treating the Legislative and Executive Branch appropriations 
the same as other Federal agencies and programs, and paring 
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costs where possible.

    Further Consolidate Federal Data Centers. This budget 
supports the bipartisan Federal Data Center Consolidation 
Initiative [FDCCI], which was created in 2010 to reverse the 
widespread escalation of Federal data center construction, 
acquisition, management, and maintenance. By increasing 
efficiencies and continued efforts to incorporate cloud 
computing technologies, the Federal Government can 
significantly decrease taxpayer spending on underused 
infrastructure.\105\
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    \105\Chief Information Officer [CIO], Federal CIO Council, ``Data 
Center Consolidation and Optimization'': https://cio.gov/drivingvalue/
data-center-consolidation/.

    Reform Information Technology. The Office of Management and 
Budget and multiple agencies could help the Federal Government 
realize savings by strengthening oversight and taking steps to 
better implement PortfolioStat, a bipartisan-supported process 
to help agencies manage their information technology 
investments.\106\ This budget supports strengthening 
congressional oversight of key Federal agencies' major 
information technology investments. Federal agencies should 
also apply better management of software licenses and the 
Office of Management and Budget should issue a directive to 
assist agencies in doing so.
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    \106\Chief Information Officer [CIO], Federal CIO Council, 
``PortfolioStat'': https://cio.gov/drivingvalue/portfoliostat/.
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                         GOVERNMENT-WIDE POLICY


                            Function Summary

    This category includes various policies that produce 
government-wide savings in multiple categories rather than in a 
single, specific budget function. For fiscal year 2017, the 
resolution calls for $34.5 billion in budget authority and 
$14.6 billion in outlays. The 10-year totals for budget 
authority and outlay savings are -$455.1 billion and -$386.7 
billion, respectively. (The figures appear in Function 930 in 
the summary tables.) As is true elsewhere, specific policies 
will be determined by the appropriate committees of 
jurisdiction.

                      Illustrative Policy Options


                         DISCRETIONARY SPENDING

    The total base discretionary budget authority for fiscal 
year 2017 assumed in the resolution is $1.070 trillion--the 
same level required by the discretionary spending caps in the 
Bipartisan Budget Act [BBA] of 2015. The resolution offers 
approximately $46.5 billion in fiscal year 2017 non-defense 
discretionary savings in several budget functions should 
Congress choose to enact additional deficit reduction for that 
year. Because these additional savings would cause the 
resolution to display a lower total base discretionary level 
than contemplated by the BBA, $46.5 billion in non-defense 
discretionary spending is added back to Function 930 to make 
the total budget resolution base discretionary level match the 
amount specified in the BBA.
    Over the 10-year budget window, the resolution assumes 
$277.6 billion in savings beyond what is contemplated in the 
BCA. Much of the assumed savings can be accomplished by the 
illustrative policy options presented in the various budget 
function summaries in this report. Additional illustrative 
options to achieve further discretionary savings are presented 
below.

    Reduce the Federal Civilian Workforce Through Attrition. 
The budget includes discretionary savings by assuming a 10-
percent reduction in certain agencies of the Federal civilian 
workforce through attrition, whereby the administration would 
be permitted to hire one employee for every three who leave 
government service. National security positions would be 
exempt.

    Reform Civil Service Pensions. The policy described in the 
Income Support, Nutrition, and Related Programs section of this 
report would increase the share of Federal retirement benefits 
funded by the employee. This policy has the effect of reducing 
the personnel costs for the employing agency. The budget 
assumes savings from a reduction in agency appropriations 
associated with the reduction in payments that agencies make 
into the Civil Service Retirement and Disability Fund for 
Federal employee retirement.

    Implement Transition to Shared Services. The current 
structure and operations of the Federal Government requires 
most agencies and departments to maintain and employ their own 
management services. Drawing on improvements made throughout 
the private sector, this budget calls for a bipartisan-
supported, government-wide transition to shared services. 
Moving to cross-agency and interagency support for management 
of internal functions such as information and technology, 
supply chain, financial activities, human resources, and 
administration will not only help government to run more 
effectively, but will also allow individual departments and 
agencies to function better together.\107\
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    \107\Partnership for Public Service, ``Building A Shared Services 
Marketplace: Recommendations from the Shared Services Roundtable,'' 
March 2015: http://ourpublicservice.org/publications/
viewcontentdetails.php?id=470.
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                            DIRECT SPENDING

    Reduce Improper Payments/Program Integrity. This budget 
calls for program integrity savings by assuming that Continuing 
Disability Reviews [CDRs] and Supplemental Security Income 
Redeterminations are fully funded and that additional steps are 
taken to reduce improper payments in Medicare, Medicaid, 
Unemployment Insurance, the Earned Income Tax Credit, and other 
programs. By ensuring that all benefits are targeted toward the 
appropriate households, this budget will reduce fraud and 
improper payments in these programs.
    Improper payments are widespread and growing, and now cost 
U.S. taxpayers in the neighborhood of $100 billion per year--
and government departments and agencies seem unable to reduce 
these excessive payments. Even more troubling is the current 
administration's apparent lack of concern and unwillingness to 
take corrective action.
    This is an issue the Budget Committee intends to pursue 
aggressively in the future under the leadership of 
Representative Palmer (R-AL) and other Committee members. The 
Committee believes those departments and agencies that cannot 
decrease the amount of improper payments should be held 
accountable for their inability to stop these inappropriate 
expenditures. The Budget Committee will work with the 
appropriations and authorizing committees exploring numerous 
ideas to effectively address this problem.
    A March 2015 report by the Government Accountability Office 
found that government-wide improper payment estimates pursuant 
to the Improper Payments Information Act of 2002, as amended, 
totaled $124.7 billion in fiscal year 2014, an increase of $19 
billion from the previous year. These improper payments were 
attributable to 124 programs spread among 22 agencies. The 
reported government-wide error rate was 4.5 percent of program 
outlays in fiscal year 2014, compared to 4.0 percent reported 
in fiscal year 2013. Nevertheless, roughly 65 percent of these 
excessive payments--or $80.9 billion--fall in just three 
programs: Medicare fee-for-service, Medicaid, and the Earned 
Income Tax Credit.
    GAO reported that agencies continue to face difficulties in 
reducing improper payments. In addition, GAO found that sharing 
death data can help prevent improper payments to deceased 
individuals or those who use deceased individuals' identities, 
but the Social Security Administration has trouble maintaining 
these data, and other Federal agencies face difficulty 
obtaining them.\108\
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    \108\Government Accountability Office, ``Improper Payments, 
Government-Wide Estimates and Use of Death Data to Help Prevent 
Payments to Deceased Individuals,'' testimony before the U.S. Senate 
Committee on Homeland Security and Governmental Affairs, 16 March 2015:
    http://www.gao.gov/assets/670/669026.pdf.

    Align the G Fund Investment Return with an Appropriate Risk 
Profile. The resolution assumes savings by correctly aligning 
the rate of return on U.S. Treasury securities within the 
Federal Employee Retirement System's Thrift Savings Plan with 
its investment risk profile. Securities within the G Fund are 
not subject to risk of default. Payment of principal and 
interest is guaranteed by the U.S. Government. Yet the interest 
rate paid is equivalent to a long-term security. As a result, 
those who participate in the G Fund are rewarded with a long-
---------------------------------------------------------------------------
term rate on what is essentially a short-term security.

    Assume Savings in Budget Control Act Continue. The BCA 
established an automatic enforcement mechanism--commonly known 
as a sequester--to ensure a promised level of savings from that 
law was actually realized. These savings were first implemented 
in 2013 and are scheduled to last through 2025. The resolution 
proposes to extend the savings created by the BCA for an 
additional year, although the budget calls on Congress to 
replace the automatic sequester with specific, targeted 
reforms.

                          Domestic Priorities

                              ----------                              

    The budget resolution provides funding for a range of 
priority activities and services that are domestic in nature. 
Although all of them are of national importance--that is why 
they appear in the Federal budget in the first place--they bear 
a special connection to the States and localities that 
constitute the Nation, as well as the vast array of non-
government institutions throughout the country. K-12 education, 
for instance, is a quintessentially local priority. Because 
most Americans do most of their traveling in or near their own 
communities, their own roads and bridges are a fundamental 
local concern. Health care is provided mainly through local 
hospitals and private physicians. All these activities, and 
many others, would exist even if there were no Federal 
Government. Washington did not create them; States and 
localities and the private sector did. These are also the main 
sources of the initiative and creativity that drives these 
domestically centered arrangements. The concept of federalism 
on which America was founded recognizes that fact, and 
encourages the diversity of approaches best furnished by layers 
of government or non-government institutions closer to the 
people served. In grouping these activities together, the 
discussion below seeks to encourage greater flexibility for 
States and localities and the private sector to find new, 
better, and more efficient ways to provide these services. 
While the Federal Government can help in these areas, its role 
should be to support, not to dominate.
    The activities presented here are mainly the discretionary 
spending components in Functions 250 through 650 in the 
conventional budget format. In two areas, however--Energy 
(Function 270) and Transportation (Function 400)--both the 
discretionary and direct spending components are presented. 
This is because in these two categories, discretionary and 
direct spending are uniquely intertwined.

                 GENERAL SCIENCE, SPACE, AND TECHNOLOGY


                Function Summary: Discretionary Spending

    The largest component of this category--about half of total 
spending--is for the space-flight, research, and supporting 
activities of the National Aeronautics and Space Administration 
[NASA]. The function also contains general science funding, 
including the budgets for the National Science Foundation [NSF] 
and the Department of Energy's Office of Science.
    The budget resolution reduces questionable and unjustified 
spending, while supporting core government responsibilities. 
The resolution emphasizes basic research, providing stable 
funding for NSF to conduct priority biological, computing, and 
information sciences; basic research in math and the physical 
sciences; and science, technology, engineering, and math [STEM] 
education. The budget provides continued support for NASA and 
recognizes the vital strategic importance of the United States 
remaining the preeminent space-faring Nation. This budget 
aligns funding in accordance with NASA's core principles: to 
support robust space capability, to allow for exploration 
beyond low Earth orbit, and to support the Nation's scientific 
and educational base.
    The vast majority of this category's funding is 
discretionary, provided by the House Committee on Science, 
Space, and Technology and the Appropriations Subcommittee on 
Commerce, Justice, Science, and Related Activities. The 
resolution calls for $30.1 billion in discretionary budget 
authority and $30.3 billion in outlays in fiscal year 2017. The 
10-year totals for discretionary budget authority and outlays 
are $332.1 billion and $327.4 billion, respectively.

           Illustrative Discretionary Spending Policy Options

    The committees of jurisdiction will determine policies to 
align with the spending levels in the resolution. The options 
below are offered as illustrations of the kinds of proposals 
that can help meet the budget's fiscal guidelines.

    Restore Core Government Responsibilities. In fiscal year 
2016, $66.4 billion was dedicated to research across the 
Federal Government, more than half to applied research. The 
resolution's levels support preserving the Federal scientific 
community's original role as a venue for groundbreaking 
discoveries and a driver of innovation and economic growth. It 
responsibly pares back applied and commercial research and 
development and areas of wasteful spending that do not provide 
a high return on taxpayer resources. The proper role of the 
Federal Government is to support basic research, and funding 
should be distributed accordingly. For example, spending for 
the Department of Energy's Office of Science includes several 
high-risk projects, which in a time of needed fiscal 
constraint, should be embarked on by the private sector 
instead. The Advanced Research Projects Agency-Energy program, 
created specifically for high-risk/high-reward energy projects, 
received almost $300 million in 2015. The Government 
Accountability Office [GAO] and the House Committee on Science, 
Space, and Technology have identified many of these grants as 
neither high-risk/high-reward nor something private industry 
could not take on itself. Of the 44 smaller companies that 
received these grants, GAO found that 18 had received grants 
from private industry for a similar technology. Funding for 
nuclear physics received almost $600 million in 2015 for 
research and development, and grants were issued to research 
groups at 90 public and private universities, along with nine 
federally funded laboratories. Much of the research conducted 
at these universities and laboratories has clear overlap and 
duplication. There must be greater oversight of the grants that 
the Department of Energy awards.
    Similarly, the NSF needs to be more transparent and 
accountable to the taxpayer. Every grant issued should be 
accompanied by an explanation of the project's scientific 
merits and how it serves the national interest as prescribed in 
the House-passed Scientific Research in the National Interest 
Act (H.R. 3293). NSF-funded studies--such as a $1.3 million 
project to measure the effectiveness of koozies in varying 
temperatures;\109\ an $853,000 project investing in a 
winemaking curriculum aimed at teenagers; and a $706,000 
project to fund a shrimp fight club at Duke University 
measuring the punching power of mantis shrimp--do not serve a 
vital national interest. Funding for these programs and 
similarly wasteful or low-return studies should be redirected 
to scientific research that better serves the national 
interest.
---------------------------------------------------------------------------
    \109\A koozie is an insulated sleeve designed to keep a beverage 
cold.
---------------------------------------------------------------------------
    Lastly, in NASA, spending on earth science, not space, has 
increased by more than 60 percent in recent years, even though 
it is not NASA's mission priority. This spending should be cut 
back to previous funding levels and redistributed to those 
missions unique to NASA.

    Reduce Expenses for the Department of Homeland Security's 
Directorate of Science and Technology. The budget recommends 
reductions in management and administrative expenses for the 
Department of Homeland Security's Directorate of Science and 
Technology, while shifting funding to frontline missions and 
capabilities.

                                 ENERGY


                            Function Summary

    The Obama Administration incorrectly believes that climate 
change is a greater threat to Americans than terrorism,\110\ 
which may be why the administration wastes billions of taxpayer 
dollars annually subsidizing green energy projects. In the 
President's budget request for fiscal year 2017, the 
administration requested approximately $3 billion for the 
purposes of energy conservation efforts and research, as well 
as development and commercialization of low- or zero-carbon 
energy sources.\111\
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    \110\Brian Hughes, ``Josh Earnest: Climate Change a greater threat 
to Americans than terrorism,'' NewsFeeding.Net, 10 February 2015.
    \111\Department of Energy, Fiscal Year 2017 Budget Justification, 
Volume 3, February 2015: http://energy.gov/cfo/downloads/fy-2017-
budget-justification.
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    In December 2015, the United States joined 195 countries at 
the Paris, France ``COP21'' United Nations Conference in an 
agreement to take steps to limit global warming. This was one 
of the President's international objectives within his Climate 
Action Plan. The Obama Administration entered into the 
agreement without any consultation with Congress. In fact, the 
administration has taken extraordinary steps to limit 
congressional oversight, advice, and consent with respect to 
this agreement. Given the President's inclination to bypass 
Congress, the agreement amounts to nothing more than a 
political gesture rather than a binding legal commitment, which 
would have to go through Congress. The administration's 
ultimate goal is to send billions of dollars to the Green 
Climate Fund--the key financing arm of the United Nations 
Framework Convention on Climate Change--without congressional 
authorization. In light of this executive overreach, the budget 
recommends increased accountability and oversight related to 
the President's Climate Action Plan initiatives.
    Just as troubling was the President's veto of bipartisan 
legislation to develop the Keystone XL pipeline. This 
legislation would expand an existing pipeline that runs from 
the Western Canadian Sedimentary Basin through the southern 
United States to provide more economical transportation of oil. 
A January 2014 report, prepared by the U.S. Department of 
State, concluded that a total of 42,100 jobs throughout the 
United States would be supported by the construction of the 
proposed pipeline.
    Meanwhile, from 2009 through 2013, the White House provided 
more than $67 billion in subsidies to green energy companies 
through tax credits and loan guarantees alone.\112\ Despite the 
excessive subsidies, solar power and wind energy combined only 
grew from 0.9 percent to 2.0 percent of domestic energy 
consumption over the same time period.\113\
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    \112\Terry M. Dinan, ``CBO Testifies on Federal Financial Support 
for Fuels and Energy Technologies,'' Congressional Budget Office, 13 
March 2013.
    \113\Energy Information Administration, ``Primary Energy 
Consumption by Source'': http://www.eia.gov/totalenergy/data/monthly/
pdf/sec1