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Federal Budget Briefing—ASMC PDI 2010 presented by Jeffrey S. Thiebert, National Grassroots Director THE CONCORD COALITION www.concordcoalition.org www.concordcoalition.org THE CONCORD COALITION About The Concord Coalition The Concord Coalition is a nationwide, non-partisan, grassroots organization advocating generationally responsible fiscal policy. The Concord Coalition was founded in 1992 by the late former Senator Paul Tsongas (D-Mass.), former Senator Warren B. Rudman (R-N.H.) and former U.S. Secretary of Commerce Peter Peterson. Former Senator Bob Kerrey (D-Ne.) became co-chair of the Concord Coalition in January 2002. www.concordcoalition.org THE CONCORD COALITION In billions of 1996 constant (chain) dollars Current Fiscal Policy $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 Fiscal Years www.concordcoalition.org THE CONCORD COALITION Federal Revenue and Spending Fiscal Year 2009 Revenues Spending Individual Income Taxes 26% Social Security 19% Corporate Income Taxes 4% Health Care 22% Payroll Taxes (SI, Medicare, & FICA) 25% International Affairs 1% Other Taxes 5% Income Security 15% Borrowed Funds 40% Education 2% Total Revenue 100% Interest on the National Debt www.concordcoalition.org 6% National Defense 19% Environment 1% Other Expenses 15% TOTAL 100% THE CONCORD COALITION Americans Want to Cut Spending – But Not on the Programs That Cost the Most Source: The Economist/YouGov Poll, April 2010 and Congressional Budget Office, January 2010. www.concordcoalition.org THE CONCORD COALITION Composition of Projected FY 2010 Federal Government Revenues and Outlays (Deficit: $1.35 Trillion) Interest Domestic* Estate & Gift Taxes ($21 billion) Defense Other Taxes Corporate Taxes Other Entitlements Social Insurance Taxes Medicare & Medicaid Individual Income Taxes Social Security Outlays: $3.52 trillion Revenue: $2.18 trillion *Includes all appropriated domestic spending such as education, transportation, homeland security, housing assistance, and foreign aid. Source: CBO January 2010. www.concordcoalition.org THE CONCORD COALITION Social Security, Medicare, & Medicaid as a Percentage of the Federal Budget All other Federal Spending Social Security, Medicare and Medicaid $2.09 Trillion $1.43 Trillion 59% 41% Source: Congressional Budget Office, January 2010. www.concordcoalition.org THE CONCORD COALITION Mandatory spending is consuming a growing share of the budget 1970 62% 1990 31% 40% 45% 2010 39% 55% 7% 15% Mandatory Net Interest 6% Discretionary Source: Congressional Budget Office, January 2010. www.concordcoalition.org THE CONCORD COALITION Outlays of Select Mandatory Spending Programs (FY 2010 Projected) Source: Congressional Budget Office, January 2010. www.concordcoalition.org THE CONCORD COALITION Change in Composition of Discretionary Spending 32% 40% 68% 60% Defense Source: Congressional Budget Office, January 2010. www.concordcoalition.org 50% 50% Non-defense THE CONCORD COALITION Outlays of Select Non-Defense Discretionary Programs (FY 2010 Projected) Education Transportation Housing, Natural Energy & Resources Nutrition Asst. Veterans Foreign Aid General Government Science, Space & Technology *includes ground, air, and water Source: Congressional Budget Office, January 2010. www.concordcoalition.org THE CONCORD COALITION As a Percentage of GDP Non-Defense Discretionary Spending as a Percentage of GDP Source: Congressional Budget Office, January 2010. www.concordcoalition.org THE CONCORD COALITION As a Percentage of GDP Defense Discretionary Spending as a Percentage of GDP Source: Congressional Budget Office, January 2010. www.concordcoalition.org THE CONCORD COALITION Projected Growth in Entitlement Spending far Greater than Defense Spending Source: Government Accountability Office and Congressional Budget Office. 2010. www.concordcoalition.org THE CONCORD COALITION Federal Spending vs. Revenues as a Percent of GDP (FY 1980-2020) CBO March Baseline Compared to the President’s Budget Actual Projected Percentage of GDP Average outlays: 21.0% Average revenues: 18.3% CBO March 2010 Baseline CBO’s Estimate of the President’s Budget Source: Congressional Budget Office, March 2010.. www.concordcoalition.org THE CONCORD COALITION Current Policy Trends Lead to Large Sustained Deficits Fiscal Years 2011-2020 Billions of Dollars -$6.0 Trillion Deficit -$14.6 Trillion Deficit CBO March 2010 Baseline The Concord Coalition Plausible Baseline adds in the effects of the new Health Care Reform law and assumes that discretionary spending grows at the rate of nominal GDP, that war costs slow gradually, that Medicare physician payment cuts are postponed, and that all expiring tax provisions (including those from the 2009 stimulus package) are extended with AMT relief. Source: Congressional Budget Office, March 2010 and Concord Coalition analysis. www.concordcoalition.org THE CONCORD COALITION Why Deficits Matter • Reduce national savings • Increase dependence on foreign lenders • Increase burden on future generations: – Through rising debt service costs; – By reducing productivity-enhancing investments • Weakened ability to meet contingencies or new challenges www.concordcoalition.org THE CONCORD COALITION Debt Held by the Public as a Percent of GDP 1940-2040 As a Percentage of GDP World War II 108.6% Source: OMB Historical Tables 2009. www.concordcoalition.org 2008 to 2010 40% 64% THE CONCORD COALITION Debt Held by the Public as a Percent of GDP 1940-2040 As a Percentage of GDP Actual World War II 108.6% Source: GAO Analysis, 2010 and OMB Historical Tables 2010. www.concordcoalition.org Projected 2010 63.6% THE CONCORD COALITION Percent of Debt Held by the Public Owned by Foreigners (1987-2009) Source: United States Treasury Department, Treasury Bulletin, December 2009. www.concordcoalition.org THE CONCORD COALITION Billions of Dollars Interest Costs Go Through The Roof Source: Congressional Budget Office, Analysis of the President’s Budget, March 2010. www.concordcoalition.org THE CONCORD COALITION Interest Costs Skyrocket Because of Recent Borrowing The simulations assume that discretionary spending grows with the economy and that all expiring tax provisions are extended. Source: Government Accountability Office, April 2008 and Feb. 2010. www.concordcoalition.org THE CONCORD COALITION Americans are living longer and having fewer children Consequently, fewer workers are available to support each Social Security recipient 1960: 5.1 to 1 Source: Social Security Administration, May 2009. www.concordcoalition.org Today: 3.1 to 1 2029: 2.2 to 1 THE CONCORD COALITION America’s Population is Aging Percentage of Population Aged 65 and Over Population age 65 and Over Year Source: Social Security and Medicare Trustees’ Report, May 2009. www.concordcoalition.org THE CONCORD COALITION Health Care Costs are Rising Faster Than the Economy Percentage of GDP Historic Level of Federal Spending Historic Level of Federal Revenues Assumes that health care cost growth will not exceed GDP growth. Assumes that health care cost growth continues at the average rate for the past 40 years (2.5 percentage points greater than GDP growth.) Assumes that health care cost growth rate declines to 1.0 percentage point greater than GDP growth— consistent with the assumption used by the Medicare Trustees. Source: Congressional Budget Office, June 2009. THE CONCORD www.concordcoalition.org COALITION Billions of Dollars Social Security Cash Deficits Source: Congressional Budget Office, March 2010. www.concordcoalition.org THE CONCORD COALITION Social Security and Medicare Part A Cumulative Cash Surpluses and Deficits In Constant 2009 Dollars — 2009 through 2085 In Billions of Constant 2009 Dollars $147 Billion: Cumulative Social Security Cash Surplus -$28 Trillion: Cumulative Social Security Cash Deficits -$58 Trillion: Cumulative Medicare Part A Cash Deficits -86 Trillion: Cumulative Social Security and Medicare Part A Cash Deficits 2010 2020 2030 2040 2050 2060 2070 2080 Calendar Year Source: Social Security Trustees’ Report—May 2009 (Intermediate Projections) www.concordcoalition.org THE CONCORD COALITION Medicare Costs Soar in the Coming Decades Calendar Year General Revenues required to fund the program Income from dedicated taxes, premiums, and state transfers Source: Medicare Trustees’ Report, May 2009. www.concordcoalition.org THE CONCORD COALITION Social Security, Medicare and Medicaid Cost Growth Outlays as a Percentage of GDP Medicaid Medicare Social Security Source: Government Accountability Office, Feb. 2010. www.concordcoalition.org THE CONCORD COALITION Percentage of Revenues Social Security, Medicare, Medicaid and Interest Consume All Federal Revenues in Less Than 15 Years Year Social Security, Medicare and Medicaid Source: Government Accountability Office, February 2010. www.concordcoalition.org Interest THE CONCORD COALITION Current fiscal policy is on an unsustainable path Federal Outlays as a Percentage of GDP Interest All Other Spending Medicaid Average tax revenue Medicare Social Security Source: Government Accountability Office, Feb. 2010. www.concordcoalition.org THE CONCORD COALITION Policy Changes Matter Projected Debt Held by the Public as a Percent of GDP Under Alternative Scenarios (2010-2045) Source: Government Accountability Office, Feb. 2010 . www.concordcoalition.org THE CONCORD COALITION