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Fiscal Future: The Challenges Ahead presented by Robert L. Bixby, Executive Director THE CONCORD COALITION www.concordcoalition.org 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 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 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 Federal Spending vs. Revenues as a Percent of GDP (FY 1980-2020) CBO January Baseline Compared to the President’s Budget Actual Projected Percentage of GDP Average outlays: 21.0% Average revenues: 18.3% CBO Jan. 2010 Baseline Source: Congressional Budget Office, January 2010 and Office of Management and Budget, Feb. 2010. www.concordcoalition.org President’s Budget 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, September 2009 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, Jan. 2010 and Office of Management and Budget, 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 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. 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. 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 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 Current fiscal policy is on an unsustainable path Federal Outlays as a Percentage of GDP Interest All Other Medicaid Average tax revenue Medicare Social Security Source: Government Accountability Office, February 2010. 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 17 Other Costs of Deficits • Deficits raise uncertainty about future policies • Deficits reduce the government’s flexibility for dealing future contingencies and crises • Deficits undermine budget discipline www.concordcoalition.org THE CONCORD COALITION 18 Popular Myths that Impede Action • Myth: We can grow our way out of difficult budget choices. • Myth: Eliminating waste in government programs will solve the deficit problem. • Myth: The deficit problem can be solved by delivering health care more efficiently. • Myth: We just need to raise taxes starting with rolling back some or all of the Bush tax cuts. • Myth: Cutting taxes will increase revenues. www.concordcoalition.org THE CONCORD COALITION Key Points of Agreement Members of the Fiscal Wake-Up Tour do not necessarily agree on the ideal levels of spending, taxes and debt, but we do agree on the following key points: • Current fiscal policy is unsustainable • There are no easy solutions, such as cutting waste fraud and abuse or growing our way out of the problem. • Finding solutions will require bipartisan cooperation and a willingness to discuss all options. • Public engagement and understanding is vital in finding solutions. • This is not about numbers. It is a moral issue. www.concordcoalition.org THE CONCORD COALITION