This report had its origin in a Committee on National Statistics workshop in November 1993, one of a series on improving economic statistics, jointly sponsored by the Bureau of Economic Analysis (BEA) and the Bureau of the Census of the U.S. Department of Commerce. The focus of the workshop was on revising the presentation of the government sector in the U.S. economic accounts to bring it more into line with the international System of National Accounts (SNA) and current data collection capability, to enhance information about the public sector, and to make the U.S. accounts more comparable to those of other countries.

The SNA guidelines treat government purchases of nonmilitary structures and equipment as capital investments and provide for a capital consumption allowance to be included in the estimate of government purchases of goods and services for current consumption. Prior to 1996 the U.S. accounts made no distinction between government purchases for current consumption and those for investment. The result was data that were inadequate for understanding the nature and value of government spending or for compiling a complete picture of investment for all sectors of the U.S. economy. Other differences between the government sector of the U.S. accounts and that of the SNA included the treatment of social insurance funds and government employee pensions and the definition and treatment of government enterprises.

A paper prepared for the workshop by Timothy Dobbs (1993) of the Bureau of Economic Analysis presented the principal issues regarding implementation of the SNA guidelines for the government sector, including differences between the SNA and the then-current national income and product accounts treatment of

government saving, consumption, and investment. A paper by Elizabeth Fogler, Sarah Holden, and Albert Teplin (1993) of the Federal Reserve Board focused on improving government balance sheets. These papers were intended to stimulate discussion on such issues as defining and valuing government assets; treatment of government enterprises, loans, loan guarantees, social insurance funds, and pension plans; and separating federal, state, and local government.

The workshop served an important purpose of reviewing BEA research and providing feedback to BEA on its plans for modernizing the government sector of the national economic accounts. Subsequently, BEA implemented some of the changes discussed: most noteworthy, the 1996 comprehensive revision of the U.S. National Income and Product Accounts separated government spending into investment and current consumption.

The workshop also served to stimulate the committee to develop further its work to improve the national economic accounts. In addition to continuing its own examination of the work of BEA, the committee has set up the Panel on Integrated Environmental and Economic Accounting, sponsored by BEA, to study the valuation of natural and environmental resources and the description of such resources in the context of the national economic accounts.

This report has two purposes. First, although many of the issues discussed at the workshop in 1993 have led to changes in BEA's handling of the national economic accounts, it responds to the request of BEA and other officials for a formal record and reference document of that workshop. Second, in light of the improvements in the government sector in the national economic accounts that have been made, the committee wishes to stimulate consideration of others, such as estimating a return on government investment. We hope that this report will continue to contribute to the work of BEA and others as the agency seeks further to modernize the national economic accounts and implement the SNA.

It is important to state that the recommendations contained in this report are those of the Committee on National Statistics, based in part on discussions that took place at a 2-day workshop held several years ago and on the papers prepared for the workshop. Although there have been developments since the workshop, the Committee chose to limit its considerations to the topics originally considered and has not revisited these issues—the report is being published at this time in order to have a historical record of the Committee's work on this topic.

This report has been reviewed by individuals chosen for their diverse perspectives and technical expertise, in accordance with procedures approved by the NRC's Report Review Committee. The purpose of this independent review is to provide candid and critical comments that will assist the authors and the NRC in making the published report as sound as possible and to ensure that the report meets institutional standards for objectivity, evidence, and responsiveness to the study charge. The content of the review comments and draft manuscript remain

confidential to protect the integrity of the deliberative process. We thank the following individuals for their participation in the review of this report: Alan J. Auerbach, Department of Economics, University of California, Berkeley; Robert J. Gordon, Department of Economics, Northwestern University; Dale W. Jorgenson, Department of Economics, Harvard University; and Charles L. Schultze, Brookings Institution, Washington, D.C. Although these individuals provided many constructive comments and suggestions, responsibility for the final content of this report rests solely with the authoring committee and the NRC.

We thank the many people who made the workshop and report possible. We are especially indebted to Martin David and Courtenay Slater for organizing the workshop and drafting the report. They were assisted by several members of the committee staff, who contributed both to the workshop and this report: Michele Conrad, Candice Evans, Betsy Huffman, Nancy Maritato, Anu Pemmarazu. We are also indebted to Eugenia Grohman, of the staff of the Commission on Behavioral and Social Sciences and Education, who edited the report.

Finally, we thank the workshop participants and those who prepared papers for the workshop for their expert contributions to the work of the committee on this important topic. A list of workshop participants is in Appendix A; a list of the papers is in Appendix B.