The Budget for Fiscal Year 2002

Publication Date: June 2002

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Banking and finance

Type:

Abstract:

The President submitted a $27 billion emergency supplemental appropriations request for fiscal year (FY) 2002 on March 21, 2002. The funds would be used for defense, homeland security, and other purposes. The House passed a larger ($29 billion) bill (H.R. 4775) on May 24. The Senate adopted its version (S. 2551) on June 3 ($31 billion). The President has threatened a veto.

The deterioration in the FY 2002 budget outlook became apparent in the early 2002 budget reports from the Administration (OMB) and the CBO. The very large surplus (with baseline estimates of $300 billion) expected early in 2001 for FY2002 disappeared and has been replaced by a deficit. A combination of changes in policies, expected economic conditions, and technical assumptions all contributed to the reduction and disappearance of the surplus over the last year.

In December 2001, Congress completed action on the last of the 13 regular appropriation bills for FY2002. While considering the regular appropriations during the fall, Congress adopted eight continuing resolutions (CR) on appropriations to provide interim funding. Policy disagreements, the terrorist attacks in September, and the anthrax disruptions all slowed the progress of the appropriations.

The budget outlook for the year was deteriorating prior to the events of the fall. A worsening economic outlook (a recession had started in March 2001) and the effects of the
June tax cut (P.L. 107-16) had dropped the baseline surplus estimate (CBO) to $175 billion in August from over $300 billion in May. In late November 2001, the Administration indicated that it expected the budget would fall into a deficit for the year.

Earlier in 2001, Congress had adopted the FY2002 budget resolution (H.Con.Res. 83) on May 10. It modified both the House and Senate versions of the resolution adopted earlier. The resolution resembled President Bush’s original proposals that had been presented in A Blueprint for New Beginnings (February 28, 2001). Those proposals included a 10-year $1.6 trillion tax cut, increased spending for education, a review of defense needs, and an “Immediate Helping Hand” to provide prescription drug benefits to low income seniors. (The Administration released its complete and detailed budget on April 9, 2001.) A modified version of the tax cut (totaling $1.35 trillion over ten years) was enacted in early June.

Over the summer of 2001, work continued on preparing for the fall debate on the appropriations for the year. In late August 2001, the Administration’s Mid-Session Review (MSR) and the Congressional Budget Office’s (CBO) Update contained sharply lower surplus estimates for FY2002. These surplus estimates for FY2002 ranged from $173 billion to $176 billion (down from April and May 2001 estimates of $231 billion to $257 billion incorporating the estimated effects of the President’s policy proposals including the tax cut).

Immediately after the terrorist attacks, Congress passed emergency supplemental appropriations (P.L. 107-38; September 18, 2001) providing $20 billion immediately and directing that another $20 billion be provided in regular appropriations. Legislation also provided $15 billion ($10 billion in loan guarantees) for airline stabilization (P.L. 107- 42; September 22, 2001).