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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 PAGE) an ee cee en es ns cn ma sn an eT a SA UE CT 2 al | ri 1 1 $400 ------------------ 22-25-5222 5 eee Ad I sr sets i ; — a & “$800 ces ee ee ence = Structural aCyclical -_--_-_--___ ee Leal - SEA ZOB = <= ae oo eee eae eo em eee rem ae em eG EEE RE ea em ee ee — “$1,600 ~~ ~~ - =~ -- 2-22 22-2 ne ee ee ee nee ee F1996 F1998 F2000 F2002 F2004 F2006 F2008 F2010 Note: 1) Congressional Budget Office defines a structural surplus or deficit as the budget surplus or deficit that would occur under current law if the influences of the business cycle on the budget — the automatic stabilizers — were removed, and cyclical surplus or deficit as the automatic net changes in revenues and outlays that are attributable to cyclical movements in real (inflation-adjusted) output and unemployment. CBO compiled this data from Dept. of Commerce’s Bureau of Economic Analysis (BEA), which maintains the national income and product accounts (NIPA). An important difference between the official budget deficit and the NIPA measure of net federal government saving is that the latter excludes such purely financial transactions as the sale of government assets, and most transactions under the Troubled Asset Relief Program, because those transactions do not help to measure current production and income. In addition, historical NIPA data are subject to significant revision; historical budget data, by contrast, are rarely revised significantly. Source: 1996-2006 data per CBO, “The Effects of KP Automatic Stabilizers on the Federal Budget,” 5/10, 2007-2010 data per White House OMB F2012 Budget Analytical Perspective. (@ 4 www.kpcb.com USA Inc. | High Level Thoughts 35 Annual Federal Government Surplus / Deficit ($ 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. @ 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 ieprseveres 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 elicits. ‘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. (@ EB) www.kpcb.com USA Inc. | High Level Thoughts 36 HOUSE_OVERSIGHT_020859