Transcript Slide 1

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The Debt is On an Unsustainable Long-Term Path
90%
Percent of GDP
77 Percent
of GDP
Debt Held By the Public
80%
Current Law with War
Drawdown
70%
60%
2010
2012
2014
2016
2018
2020
2022
2024
Source: CBO Current Law with War Drawdown Savings, CRFB calculations
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Debt is Worse if Congress Does Not Pay For Changes
90%
Percent of GDP
80 Percent
of GDP
Permanent Doc Fix
Debt Held By the Public
80%
70%
Extension of Normal Tax Extenders and
Refundable Tax Credits
60%
2010
2012
2014
2016
2018
2020
2022
2024
Source: CBO, CRFB calculations
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Debt is Worse if Congress Does Not Pay For Changes
90%
Percent of GDP
84 Percent
of GDP
Repeal of Future
Sequester Cuts
Debt Held By the Public
80%
70%
60%
2010
2012
2014
2016
2018
2020
2022
2024
Source: CBO, CRFB calculations
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Debt is Worse if Congress Does Not Pay For Changes
90%
Percent of GDP
86 Percent
of GDP
Extension of Unemployment
Benefits and Bonus Depreciation
Debt Held By the Public
80%
70%
60%
2010
2012
Source: CBO, CRFB calculations
2014
2016
2018
2020
2022
2024
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The War Savings Gimmick
CBO assumes war spending will grow with inflation, rather than fall as intended
$120
Billions
Increase Current War Spending
With Inflation (CBO Baseline)
War Spending
$100
$80
Reduce Troop Levels as
Scheduled
$60
President’s War Funding Levels
$40
CBO’s Troop Reduction Schedule
$20
$0
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Source: CBO, OMB
Note: “War Spending” refers to OCO budget authority. CBO baseline maintains current war spending with inflation, while
their “Troop Reduction Schedule” uses CBO’s drawdown of war spending assuming troop levels are reduced from 85,000
in 2013 to 30,000 by 2017.
2023
2024
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The War Gimmick Does Not Generate Real Savings
“[R]eductions relative to the [CBO] baseline might simply reflect policy decisions
that have already been made and that would be realized even without such
funding constraints.”
— Congressional Budget Office
“Drawing down spending on wars that were already set to wind down and that
were deficit financed in the first place should not be considered savings. When you
finish college, you don’t suddenly have thousands of dollars a year to spend
elsewhere — in fact, you have to find a way to pay back your loans.”
— Maya MacGuineas, Committee for a Responsible Federal Budget
“The savings from troop reductions in Iraq and Afghanistan do not represent
actual savings.”
— James Horney, Center on Budget and Policy Priorities
“An honest budget cannot claim to save taxpayers’ dollars by cutting spending
that was not requested and will not be spent.”
— Chairman Paul Ryan, House Budget Committee
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Small Phony War “Savings” Create a Huge Potential Slush Fund
Caps above intended spending do not create savings. They open the door to new costs.
$180
Billions
$160
Planned Troop Drawdown
$50 Billion Phony War "Savings"
Current War Spending, Inflated
President's Budget
War Spending
$140
$50 Billion in Phony Savings
$120
$100
$80
~$600 Billion Slush Fund
$60
$40
$20
$0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Source: CRFB calculations based on CBO and OMB data
Note: Spending refers to budget authority. “Current War Spending, Inflated” refers to CBO’s current law baseline war
budget authority. “Planned Troop Drawdown” uses CBO’s drawdown of war spending assuming troop levels are reduced
from 85,000 in 2013 to 30,000 by 2017.
2022
2023
2024
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Timing Gimmick #1 – Savings Now Which Cost Later
Pension smoothing would reduce deficits in early years but increase them over time
$5
Billions
Savings to the Federal Budget
$4
$3
$2
$1
$0
2014
2015
2016
2017
2018
2014-2019 Savings: $17 billion
-$1
2020-2024 Costs: $13 billion
2019
2020
2021
2022
2023
2024
Costs
Continue
-$2
-$3
-$4
Source: Congressional Budget Office, 2/7/14
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Pension Smoothing Does Not Generate Real Savings
“These are gimmicks, plain and simple...collecting more taxes now and less in
taxes later doesn't help our bottom line.”
— Maya MacGuineas, Committee for a Responsible Federal Budget
“This proposed change in pension funding rules can’t ‘pay for’ anything. While it
would raise money at first, it would lose money in later years.”
— Chye-Ching Huang, Center on Budget and Policy Priorities
“The proposal to ‘smooth’ pension contributions would merely shift tax revenue
from the future into the present while destabilizing pensions even further and
increasing the risks of a taxpayer pension bailout.”
— Romina Boccia, Heritage Foundation
“Such tactics mock the very idea of PAYGO. These are not offsets. They are
charades.”
— Bob Bixby, Concord Coalition
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Timing Gimmick #2 – Shifting Savings Inside the Budget Window
The “Pathway to SGR Reform Act” shifted $2 billion of the sequester from 2024 to 2023
$20
Mandatory Sequester Savings
$18
Billions
11th Year
Cost: $2.1
Billion
10 Year Increase in Savings: $2.1 Billion
$16
$14
$12
$10
$8
$6
$4
$2
$0
2014
2015
2016
2017
2018
Source: Congressional Budget Office and CRFB staff calculations
2019
2020
2021
2022
2023
2024
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Timing Gimmick #3: Temporary Savings, Permanent Costs
Using one-time savings to pay for a permanent tax cut will increase debt in future years
$60
Billions
End of the 10-year budget window
Savings to the Federal Budget
$50
$40
$30
$20
10-Year Savings from
Repealing LIFO:
$114 billion
$10
$0
Costs
Continue:
~$10 bn/yr
-$10
10-Year Costs From a 1% Corporate Rate Cut:
$113 billion
-$20
Debt Impact
-$30
2015
2016
2017
2018
2019
2020
2021
2022
2023
Source: CRFB staff calculations based on CBO estimates. For simplicity, numbers exclude interest savings.
2024
2025
2026
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The Harm in Offsetting 1st-Year Costs with 10th-Year Savings
Accrued interest from waiting 10 years could leave a third of a bill’s costs unpaid.
40 Billions
Rising Costs from Accumulated Interest
35
Cumulative Costs
30
$25
billion
savings
25
20
$25
billion
costs
15
10
$8.4
billion
interest
5
0
2015
2016
2017
2018
2019
2020
Note: Graph assumes $25 billion in 2015 costs paid for with $25 billion of savings in 2024
2021
2022
2023
2024
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For More Information,
Contact Stark Sutton at
[email protected] or 202-735-2811
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