Even Adjusting For Cyclical Impact of Recessions, USA Inc.’s 2010
Structural Operating Loss = -$817 Billion vs. -$78 Billion 15 Years Ago
USA Inc. Annual Operating Surplus / Deficit, Structural vs. Cyclical’, F1996 — F2010 GAGE) a eee en es ns cn a a a nn mT aT A EC aT
2 al | ri 1 1 1 $400 ------------------ 5252225252222 | I er ck ta it a ; — a & “$Q00 ce see ee ence = Structural aCyclical ----_-_--_--_ ee Leal -
SEA ZOB = <= ae oo ee ce ee ee em ee rem me em ae SER RE ea eR ee eee — »
“$1,800 ~~ ~~ = =~ <= 2-2 2-2-2 ee ee ne ee ee ee ee ee F1996 F1998 F2000 F2002 F2004 F2006 F2008 F2010
Note: 1) Congressional Budget Office defines a structural surplus or deficit as the budget surplus or deficit that would occur under current law if the influences of the business cycle on the budget — the automatic stabilizers — were removed, and cyclical surplus or deficit as the automatic net changes in revenues and outlays that are attributable to cyclical movements in real (inflation-adjusted) output and unemployment. CBO compiled this data from Dept. of Commerce’s Bureau of Economic Analysis (BEA), which maintains the national income and product accounts (NIPA). An important difference between the official budget deficit and the NIPA measure of net federal government saving is that the latter excludes such purely financial transactions as the sale of government assets, and most transactions under the Troubled Asset Relief Program, because those transactions do not help to measure current production and income. In addition, historical NIPA data are subject to significant revision; historical budget data, by contrast, are rarely revised significantly. Source: 1996-2006 data per CBO, “The Effects of KP Automatic Stabilizers on the Federal Budget,” 5/10, 2007-2010 data per White House OMB F2012 Budget Analytical Perspective. (@)E) www.kpcb.com USA Inc. | High Level Thoughts 35
Annual Federal Government Surplus / Deficit ($ Billion)
Understanding Differences Between
Economist Language vs. Equity Investor Translation
Economist Language Equity Investor Approximate Translation* e Budget Deficit — The amount by which a e Cash Flow — ‘Cash in’ minus ‘cash out.’
government's expenditures exceed its receipts over a particular period of time.
e Structural Deficit = The portion of the e Cash Flow (ex. One-Time Items)* _—
budget deficit that results from a ‘Cash in’ minus ‘cash out’ excluding fundamental imbalance in government expenditures that are one-time in nature receipts and expenditures, as opposed to (such as economic stimulus spending).
one based on the business cycle or one- time factors. e One-Time Expenses* — TARP / GSE /
e Cyclical Deficit — The portion of the stimulus spending related to economic
budget deficit that results from cyclical
factors such as economic recessions prsevernells rather than from underlying fiscal policy. e Federal Debt Held By the Public — The e Debt — Cumulative negative cash flow accumulation of all previous fiscal years’ financed by borrowing. d fi it Note: *We acknowledge that while the concept of ‘cash flow ex. one-time items’ and ‘one-time expenses’ is similar to ‘structural deficit’ and erlcits. ‘cyclical deficit,’ respectively, these terms are not interchangeable and have different definitions. Congressional Budget Office defines a
structural surplus or deficit as the budget surplus or deficit that would occur under current law if the influences of the business cycle on the
budget — the automatic stabilizers — were removed, and cyclical surplus or deficit as the automatic net changes in revenues and outlays that
KP are attributable to cyclical movements in real (inflation-adjusted) output and unemployment. (@E) www.kpcb.com USA Inc. | High Level Thoughts 36
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