Reconciliation and the Deficit in FY2006 and Through FY2010: Fact Sheet

CRS Report for Congress
Reconciliation and the Deficit in FY2006 and
Through FY2010: Fact Sheet
Philip D. Winters
Analyst in Government Finance
Government and Finance Division
Summary
The budget resolution for FY2006 (H.Con.Res. 95), adopted by Congress on April
28, 2005, included reconciliation instructions for three bills.¹ The first reconciliation bill
would cut mandatory spending by $1.5 billion in FY2006 and by $34.7 billion over
FY2006 — FY2010. The second would reduce revenues by $11.0 billion in FY2006
and by $70.0 billion over the five-year period. Another $35.7 billion in revenue
reductions over five years was assumed in the budget resolution, but was not part of the
reconciliation instructions. The third would raise the statutory public debt limit by $781
billion to $8,965 billion to accommodate the government’s ongoing borrowing needs
to finance its deficits. Only the first two instructions would have any direct effect on the
deficit over those five years (the debt limit has no direct effect on the deficit).
In FY2006, the budget resolution set total spending (outlays) at $2,577.4 billion, of
which $1,598.1 billion (62.0%) is mandatory. It set total revenues at $2,194.7 billion in
FY2006. Over the five-year period, the budget resolution set cumulative total spending
at $13,840.1 billion, of which $9,068.1 billion (65.5%) was for mandatory spending.
Total cumulative revenues over the five years were set at $12,440.5 billion. These totals
assume the adoption of both the spending and revenue cuts required by reconciliation and
any other policy changes affecting outlays or revenues.
The budget resolution assumes that total spending and revenues will increase each
year during FY2006-FY2010. The reductions from baseline estimates (not in year-to-year
dollar reductions) in mandatory spending and revenues modestly slow their growth rates.
The deficit would decrease in each year under budget resolution policies.
Reconciliation instructions to reduce mandatory spending would reduce total
mandatory spending in FY2006 by 0.094% and the five-year cumulative mandatory
spending by 0.383%. The FY2006 mandatory reduction would reduce the deficit estimate
by 0.409% in that year. The five-year reductions in mandatory spending would reduce the

¹ The House and Senate reconciliation instructions are set forth in sections 201 and 202 of the
budget resolution; see pages 11-14 of the Conference Report on H.Con.Res. 95, H.Rept. 109-62
(April 28, 2005).
Congressional Research Service ˜ The Library of Congress

adjusted five-year cumulative deficit estimate by 2.612%. Reconciliation instructions to
reduce revenue would reduce total revenues in FY2006 by 0.497% and reduce five-year
cumulative revenues by 0.558%. Some of the tax cuts that might be included in
reconciliation legislation would extend existing tax cuts that otherwise would expire
during the five-year period. The tax cuts called for in reconciliation would increase the
FY2006 deficit estimate by 3.002% and would increase the five-year cumulative deficit
estimate by 5.269%.
Although the reconciliation instructions to cut mandatory spending (from baseline
estimates) is an attempt by Congress to reduce the deficits (from baseline levels) expected
over the next five years, the reconciliation instructions to cut taxes move in the opposite
direction and would lead to an increase in the deficit (from baseline levels). The net
effect of the reconciliation legislation required by the budget resolution would be to
increase, from baseline levels, the deficit in FY2006 (by 2.593%) and over the five-year
period (by 2.657%).
Potential Effects of Reconciliation Legislation on Spending,
Revenues and Deficit Levels²
FY2006 FY2006-FY2010
In Billions of Dollars
Budget Resolution Totals (without reconciliation)
Spending 2,578.9 13,874.8
Mandatory Spending1,599.69,102.9
Reve nues 2,212.5 12,546.2
Deficit -366.4 -1,328.6
Reconciliation Instructions
Mandatory Reductions-1.5-34.7
Revenue Reductions-11.0-70.0
Budget Resolution Totals (with reconciliation)
Spending 2,577.4 13,840.1
Mandatory Spending1,598.19,068.2
Reve nues 2,194.7 12,440.5
Deficit -382.7 -1,399.6
In Percent
Reconciliation Reductions in Totals
Total Spending0.058%0.250%
Total Mandatory Spending0.0940.381
Total Revenues0.4970.558
Reconciliation Change in Deficit ^a
Mandatory Reductions-0.409-2.612
Revenue Reductions3.0025.269
Net Change2.5932.657
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^Source:^H^.^R^e^pt^{. 109-}^{62 (A}^pri^l^{28, 2005), t}^a^bl^es^on^{pp. 50-}^{55 an}^d^p.^71,^an^d^cal^cu^l^a^tⁱ^oⁿ^s^prepared^by^C^R^S.

² Figures reflect the unified budget, which include transactions of the off-budget Social Security
Trust Funds and the Postal Service Fund.