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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. Cyclical¹, F1996 – F2010
$400
$0
-$400
-$800
-$1,200
-$1,600
Annual Federal Government Surplus / Deficit ($ Billion)
F1996 F1998 F2000 F2002 F2004 F2006 F2008 F2010
Structural Cyclical

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 Automatic Stabilizers on the Federal Budget,” 5/10, 2007-2010 data per White House OMB F2012 Budget Analytical Perspective.
KP CB www.kpcb.com USA Inc. | High Level Thoughts 35

Understanding Differences Between Economist Language vs. Equity Investor Translation

Economist Language
• Budget Deficit – The amount by which a government's expenditures exceed its receipts over a particular period of time.
• Structural Deficit – The portion of the budget deficit that results from a fundamental imbalance in government receipts and expenditures, as opposed to one based on the business cycle or one-time factors.
• Cyclical Deficit – The portion of the budget deficit that results from cyclical factors such as economic recessions rather than from underlying fiscal policy.
• Federal Debt Held By the Public – The accumulation of all previous fiscal years’ deficits.

Equity Investor Approximate Translation*
• Cash Flow – ‘Cash in’ minus ‘cash out.’
• Cash Flow (ex. One-Time Items)* – ‘Cash in’ minus ‘cash out’ excluding expenditures that are one-time in nature (such as economic stimulus spending).
• One-Time Expenses* – TARP / GSE / stimulus spending related to economic recession.
• Debt – Cumulative negative cash flow financed by borrowing.

Note: *We acknowledge that while the concept of ‘cash flow ex. one-time items’ and ‘one-time expenses’ is similar to ‘structural deficit’ and ‘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 are attributable to cyclical movements in real (inflation-adjusted) output and unemployment.
KP CB www.kpcb.com USA Inc. | High Level Thoughts 36
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