November 25, 1998
The Honorable Al Gore
President of the Senate
Washington D.C. 20515
Dear Mr. President:
The Balanced Budget and
Emergency Deficit Control Act of 1985 (Section 251 (a) (7)), as
amended by the Budget Enforcement Act of 1997, requires that OMB submit a report to
Congress on appropriations legislation within seven days of enactment. Section 252(d) requires
that OMB submit a report to Congress on direct spending or receipts legislation within seven
days of enactment. Enclosed are separate appropriations and pay-as-you-go reports for Public
Law 105-277, which became law on October 21, 1998.
/s/
Jacob J. Lew
Director
Enclosure
(82 kb)
Identical Letter Sent to The Honorable Newt Gingrich
November 25, 1998
The Honorable Newt Gingrich
Speaker of the House of
Representatives
Washington, D.C. 20515
Dear Mr. Speaker:
The Balanced Budget and
Emergency Deficit Control Act of 1985 (Section 251 (a) (7)), as
amended by the Budget Enforcement Act of 1997, requires that OMB submit a report to
Congress on appropriations legislation within seven days of enactment. Section 252(d) requires
that OMB submit a report to Congress on direct spending or receipts legislation within seven
days of enactment. Enclosed are separate appropriations and pay-as-you-go reports for Public
Law 105-277, which became law on October 21, 1998.
/s/
Jacob J. Lew
Director
Enclosure
(82 kb)
Identical Letter Sent to The Honorable Al Gore
NOTE: This PAYGO report should
proceed after table 12, page 39 of this 7-Day-After-Report)
OMB COST ESTIMATE
FOR PAY-AS-YOU-GO CALCULATIONS
Report No: 471
Date: 11/25/98
(Fiscal years; in millions of dollars) | ||||||
1998 | 1999 | 2000 | 2001 | 2002 | 2003 | |
Outlay effect...... | 0 | 69 | 618 | 641 | 295 | 330 |
Receipt effect..... | 0 | -181 | 3,498 | 2,147 | 1,413 | 2,724 |
Net.................... | 0 | 250 | -2,880 | -1,506 | -1,118 | -2,394 |
OMB estimates that P.L. 105-277 will result in pay-as-you-go costs of $250 million in 1999 but savings of $7.6 billion over five years. The revenue provisions are estimated to reduce receipts $181 million in 1999 and increase them $9.6 billion over five years. The major tax provisions include the following:
P.L. 105-277 also includes a variety of provisions affecting direct spending, which are estimated to increase outlays $69 million in 1999 and $2.0 billion over five years. The major provisions include the following:
(Fiscal years; in millions of dollars) | ||||||
1998 | 1999 | 2000 | 2001 | 2002 | 2003 | |
Outlay effect... | 0 | 121 | 1,989 | -1,037 | 102 | -40 |
Receipt effect.. | 0 | 201 | 1,869 | 14 | -734 | -240 |
Net cost.......... | 0 | -80 | 120 | -1,051 | 836 | 200 |
For the bill as a whole, OMB estimates a net pay-as-you-go cost of $250 million in 1999, and a net savings of $7.6 billion over five years. CBO estimates a net savings of $80 million in 1999, and a net cost of $25 million over five years. OMB estimates a net increase in outlays of $32 million in 1999 and $1.9 billion over five years. CBO estimates a net increase in outlays of $121 million in 1999, and $1.1 billion over five years. OMB estimates a net reduction in receipts of $181 million in 1999, and a net revenue gain of $9.6 billion over five years. CBO estimates a net revenue gain of $201 million in 1999, and $1.1 billion over five years.
Of the five-year, $8.5 billion receipts difference, the largest difference
is due to the provision restricting abusive liquidating REIT transactions.
Over five years, OMB estimates receipt increases of $15 billion from this
provision, while CBO estimates receipt increases of $5.6 billion. P.L. 105-277
required that OMB score this provision using the economic and technical assumptions
used in preparing the FY 1999 Mid-Session Review (MSR) baseline receipts forecast.
The OMB MSR receipts baseline contained an explicit adjustment for anticipated
revenue losses associated with liquidating REIT transactions. It is believed
that CBO's estimate was made relative to a baseline that did not fully capture
the potential revenue erosion of these transactions. Because of the baseline
differences, OMB estimates that the provision restricting liquidating REIT
transactions raises significantly more revenue.
Partially offsetting the estimating difference for the liquidating REIT
provision are differences in estimates for the extension of certain expiring
tax and trade provisions and provisions relating to farmers. OMB estimates
of the revenue loss for the tax and trade extensions and farming provisions
exceed CBO's estimates by $886 million and $675 million, respectively. Technical
modeling differences of the 1-year extension of a modified exception from
subpart F for active financing income and the provision of a special 5-year
net operating loss carryback period for farming losses account for most of
the estimating differences.
There are differences between OMB and CBO scoring of the provisions affecting Medicare, veterans compensation, and TVA debt refinancing. For the Medicare provisions, CBO estimates $150 million in outlays in 1999 and $800 million over five years. OMB estimates 1999 outlays of $20 million, and five-year outlays of $710 million. In 2000, OMB estimates outlays of $510 million, while CBO estimates outlays of $2.0 billion. In 2001, OMB estimates outlays $480 million, while CBO estimates outlay savings of $1.1 billion. CBO's baseline assumes higher Medicare spending, and this accounts for the large differences in the home health estimates in 2000 and 2001. For veterans compensation, OMB and CBO differ in their assumptions of veterans behavior and how quickly the Department of Veterans Affairs (VA) will implement the provision affecting benefits for Gulf War veterans. Based on experience with Agent Orange legislation, OMB assumes VA will process and grant more claims than CBO does. OMB estimates outlays of $502 million from 2001-2003, while CBO estimates outlays of $40 million over the same three years. For the TVA debt repayment provision, OMB assumes lower long-term interest rates and thus a higher market value for TVA's debt than does CBO. OMB estimates outlays of $94 million in 1999, and $690 million over five years. CBO estimates outlays of $16 million in 1999, and $306 million over five years.
CUMULATIVE EFFECT OF DIRECT SPENDING AND REVENUE LEGISLATION ENACTED TO DATE:
(Fiscal years; in millions of dollars) 1998 1999 2000 2001 2002 2003 Outlay effect...... -180 -746 731 918 558 812 Receipt effect..... 91 98 3,696 1,778 754 1,958 Net................... -271 -844 -2,965 -860 -196 -1,146