Although the trend toward higher inflation is also evident in Interest Rates Both OMB and CBO expect short-term interest rates to remain *President's FY 2004 Budget; CBO's "Economic & Budget Outlook: Fiscal Years 2004-2013"; Blue Chip March 2003 Economic Indicators for III. SPENDING AND REVENUES BASELINE ASSUMPTIONS A budget resolution is a statement of dollar aggregates that represent the set of spending and tax policies that the Congress agrees to pursue over some time in the future, but it does not exist in a vacuum. The way we have come to explain a budget resolution is to describe how it would change these aggregates compared to what the budget would look like if current law were to remain in place. The starting point for such a comparison point is called a budget baseline. The baseline used by the Budget Committee is based on projections made by the Congressional Budget Office in its January 2003 Budget and Economic Outlook: Fiscal Years 2004 through 2013, as revised and reported in CBO's March 2003 Analysis of the President's Budgetary Proposals for Fiscal Year 2004. Congressional budget law acknowledges the utility of a baseline by providing details about how a baseline is to be constructed. Section 257 of the Balanced Budget and Emergency Deficit Control Act sets out the rules that CBO follows when preparing the baseline. For discretionary spending (which is controlled by annual appropriation bills), the rules provide that the projections should assume that discretionary appropriations are maintained at the level enacted in the current year (in this case, fiscal year 2003), adjusted for inflation, throughout the projection period (currently, 2004 through 2013). For mandatory spending and revenues, which are usually governed by permanent law, the rules generally provide that the projections should assume no changes in current law (though any phasing in, or phasing out, of policy changes provided for in current law are reflected). There are certain specified exceptions. In the case of mandatory spending, any programs in place in 1997 that have outlays of $50 million or more a year are considered to be permanent even if they actually expire under current law. (See Table 4-8 on pages 92-93 of CBO's January 2003 Budget and Economic Outlook for a list of programs that the baseline assumes will continue beyond their current expiration dates.) For mandatory programs with annual outlays of more than $50 million enacted after 1997, CBO makes the decision whether to continue an expiring program in the baseline on a case-by-case basis, in consultation with the House and Senate Budget Committees. This way, recently created programs that were intended to be temporary are assumed to expire in the baseline. The revenue baseline takes into account that some provisions are scheduled to change or expire over the 2004-2013 period. Overall, the baseline assumes that those changes and expirations occur on schedule. However, any excise tax dedicated to a trust fund is assumed to be continued in the baseline even if it is scheduled to expire under current law. This special rule affects the projections for taxes that finance the Highway Trust Fund, the Airport and Airways Trust Fund, and the Leaking Underground Storage Tank Trust Fund. The baseline used by the Budget Committee in developing the budget resolution for fiscal year 2004 is based on the March 2003 projections of CBO. A. SPENDING BY FUNCTION Function 050: NATIONAL DEFENSE The National Defense budget function includes the Department of Defense (95 percent of the function total), defense activities in the Department of Energy (4 percent), and small amounts expended in other federal agencies. COMMITTEE-REPORTED RESOLUTION [In billions of dollars] 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2003 Budget Authority 392.5 400.5 420.1 440.2 460.4 480.9 487.6 493.3 501.1 509.0 517.3 386.2 400.9 414.2 426.0 438.7 462.9 476.3 486.3 498.6 499.7 512.8 Discretionary The Committee-reported resolution assumes the President's request for discretionary spending for National Defense totaling $400.1 billion in BA and $400.6 billion in outlays for 2004. This represents an increase of $7.9 billion in BA (+2.0 percent) and $14.2 billion in outlays (+3.7 percent) from the 2003 level. The Committee-reported resolution includes the following specific assumptions: Department of Defense The Committee-reported resolution assumes $380.8 billion in discretionary budget authority for the Department of Defense, an increase of $6.2 billion (+1.6 percent) above the 2003 appropriated level of $374.6 billion. The Committee-reported resolution assumes $231.9 billion in discretionary budget authority for readiness accounts (military personnel and operations and maintenance) in 2004. This represents an increase of $2.4 billion in BA (+1.0 percent) above the 2003 appropriated level of $229.5 billion. These appropriations would support an active duty end strength of 1,388,100 and a Selected Reserves strength of 863,000. It would also support pay raises ranging from 2.0 percent to 6.3 percent, targeted by rank and years of service. The Committee-reported resolution assumes $136.2 billion for investment accounts (procurement and research, development, testing, and evaluation) in 2004. This represents an increase of $4.8 billion in BA (+3.9 percent) above the 2003 appropriated level of $131.4 billion. Major purchases would include a Virginia Class submarine, 3 DDG-51 destroyers, 42 F/A-18E/F fighter aircraft, and 22 F-22 fighter aircraft. For 2004, the Committee-reported resolution assumes $9.1 billion in discretionary budget authority for military construction and family housing representing a 13.8 percent decrease from the 2003 appropriated level of $10.5 billion. The Committee-reported resolution does not assume costs associated with disarming Iraq or other costs that would be incurred as a precursor to or in the aftermath of any such operations. Department of Energy The Committee-reported resolution assumes $16.9 billion in discretionary budget authority for defense activities in the Department of Energy representing an increase of $1.1 billion (+6.9 percent) above the 2003 enacted level of $15.8 billion. The Committee-reported resolution assumes $8.8 billion in discretionary budget authority for the National Nuclear Security Administration representing an increase of $796 million (+10.0 percent) above the 2003 enacted level of $8.0 billion. The Committee-reported resolution assumes $7.7 billion in discretionary budget authority for the Department of Energy's environmental and other defense activities representing an increase of $185 million (+2.5 percent) above the 2003 enacted level of $7.6 billion. Mandatory The Committee-reported resolution assumes no mandatory increases or decreases in this function. Of note, the Committee-reported resolution assumes full funding for the so-called "Purple Heart Plus" program, which was included in last year's Defense Authorization Act. The provision allows all disabled military retirees whose disabilities are a direct result of combat, and those most severely disabled (60 percent or greater) military retirees whose disabilities are a direct result of combat-related injury, to receive their full military retirement pay as well as a special compensation equal to the amount of veterans' disability compensation-without offset. Function 150: INTERNATIONAL AFFAIRS The International Affairs budget function funds the operation of embassies and other diplomatic missions abroad; foreign aid grants and technical assistance activities in less developed countries; security assistance to foreign governments; foreign military sales; U.S. contributions to international financial institutions and international organizations; the Export-Import Bank and other trade promotion activities; and refugee assistance. The Committee-reported resolution assumes discretionary spending in this function would total $27.5 billion in BA and $26.1 billion in outlays for 2004. This represents an increase of $2.4 billion in BA (+8.4 percent) and $100 million in outlays (+0.4 percent) from the 2003 level. The Committee-reported resolution includes the following specific assumptions: International Development and Humanitarian Assistance The Committee-reported resolution assumes $11.5 billion in discretionary budget authority for International Development and Humanitarian Assistance, an increase of $1.1 billion (+10.5 percent) above the 2003 appropriated level of $10.4 billion. Within International Development and Humanitarian Assistance, the Committee-reported resolution assumes the creation of the Millennium Challenge Corporation. The Committee-reported resolution would increase the Millennium Challenge Account to a level consistent with the President's plan by 2008. Within International Development and Humanitarian Assistance, the Committee-reported resolution also assumes a new Global AIDS Initiative ($450 million in 2004 and $22.3 billion over 10 years), and a new fund for dealing with famine ($200 million in 2004 and $2.2 billion over 10 years). International Security Assistance The Committee-reported resolution assumes $7.5 billion in discretionary budget authority for International Security Assistance, an increase of $791 million (+11.8 percent) above the 2003 appropriated level of $6.7 billion. Conduct of Foreign Affairs The Committee-reported resolution assumes $7.5 billion in discretionary budget authority for the Conduct of Foreign Affairs, an increase of $636 million (+9.2 percent) above the 2003 appropriated level of $6.9 billion. Foreign Information and Exchange Activities The Committee-reported resolution assumes $983 million in discretionary budget authority for Foreign Information and Exchange Activities, an increase of $152 million (+18.3 percent) above the 2003 appropriated level of $831 million. Mandatory The Committee-reported resolution assumes no mandatory increases or decreases in this function. Function 250: GENERAL SCIENCE, SPACE AND TECHNOLOGY This function includes the National Aeronautics and Space Administration (NASA) civilian space program and basic research programs of the National Science Foundation (NSF) and Department of Energy (DOE). Budget Authority COMMITTEE-REPORTED RESOLUTION [In billions of dollars] 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 23.2 23.6 24.4 25.2 26.1 26.8 27.5 28.1 28.8 29.5 30.2 21.6 22.7 23.7 24.4 25.2 25.9 26.6 27.3 28.0 28.6 29.3 |