The Federal Budget in 2009

1. The Federal Budget in 2009 Kris Cox Center on Budget and Policy Priorities Pennsylvania Budget and Policy Center Budget Summit February 26, 2009

2. Composition of the Federal Budget in 2007 Source: Office of Management and Budget data.

4. Thank You Kris Cox Center on Budget and Policy Priorities cox@cbpp.org www.cbpp.org

5. The Economic Recovery Package in Pennsylvania:Selected impacts on state and local budgets State Medicaid, FY09………………………………………………………$1,160 million Medicaid, FY10………………………………………………………$1,920 million Medicaid, FY11………………………………………………………$1,000 million “Fiscal Stabilization” – non-education (over 2 yrs) ……..$347 million State & school districts “Fiscal Stabilization” – education (over 2 yrs)............$1,559 million Special education and Title I (school districts).............$970 million American Recovery and Reinvestment Act Signed into law February 17, 2009.

6. The Economic Recovery Package in Pennsylvania :Selected impacts on vulnerable families and individuals Unemployment insurance: Receive increased benefits....................................1,056,058 workers Benefit from extended eligibility...............................155,691 workers Increased funding to support reforms.............................$292 million Food stamps (SNAP): Additional funding for groceries......................................$779 million Number benefiting............................................1,261,000 individuals Child care: Additional funding (over 2 years)..................................$60.1 million American Recovery and Reinvestment Act Signed into law February 17, 2009.

7. 46 States Facing Budget Shortfalls

8. Source: CBPP projections as of February 9, 2009.

10. Poverty Is Likely to Reach a New High Number of poor families, in millions

12. Under Current Policies, Debt Will Reach 279 Percent of GDP in 2050 Source: CBPP projections based on Congressional Budget Office data and CBPP assumptions about the impact of the recession on the federal budget.

13. By 2031, “Big 3” Programs Plus Defense Would Consume All Federal Revenue Source: CBPP projections based on Congressional Budget Office data and CBPP assumptions about the impact of the recession on the federal budget.

14. Rising Health Costs, Not Demographics, are the Main Driver of Growth in the “Big Three” Source: CBPP projections based on Congressional Budget Office data.

15. Cost Growth in Medicare and Medicaid Mirrors Health Care System As a Whole Source: CBO Long-Term Projections, December 2007

16. Medicare, Medicaid, and Social Security Expected to Rise Rapidly Source: CBPP projections based on Congressional Budget Office data.

17. Long-Term Fiscal Problem Not a General “Entitlement Crisis” Source: CBPP projections based on Congressional Budget Office data.

18. Health Care Cost Containment Would Shrink Debt Growth Source: CBPP projections based on Congressional Budget Office data and CBPP assumptions about the impact of the recession on the federal budget.

19. From Large Surpluses to Large Deficits in Just 6 Years Cumulative Surpluses/Deficits, 2001-2008 Surplus Deficit Source: CBPP calculations based on Congressional Budget Office data.

20. Even Excluding Funding for the Wars, Regular Defense and Security Funding Has Grown While Domestic Discretionary Funding Has Hardly Increased Share of the Economy Source: CBPP calculations based on OMB and CBO data. Defense totals exclude funding for the wars in Iraq and Afghanistan; domestic discretionary totals include emergency and supplemental funding.

21. Last 26 Years Have Seen Rapid Income Growth at the Top, Virtually No Growth at the Bottom Growth in average real pre-tax income, 1979-2005 Source: CBPP calculations based on Congressional Budget Office data.

22. The 2001-2007 Expansion Was Weaker Than Average; Only Corporate Profits Grew Rapidly Average Real Growth, 2001-2007 Expansion Average Real Growth, Other Post-World War II Expansions Source: CBPP calculations based on Commerce Department, Labor Department, and Federal Reserve data.

23. The Goal: Balanced Approach To Deficit Reduction • Balanced approach: include revenue increases as well as spending cuts. • Balanced approach was taken in 1990 and 1993 by Presidents Bush and Clinton.

24. Likely Consequences of Unbalanced Approach to Deficit Reduction • Large program cuts over time. • Federal government may be unable to fulfill some core functions. • More costs shifted to states.

25. Tax Cuts Cost More Than MostAgency Budgets 2008 Agency Budgets, Tax Cuts in 2008 Source: CBPP calculations based on Office of Management and Budget, Congressional Budget Office, Joint Committee on Taxation, and Urban-Brookings Tax Policy Center data.

26. Financing the Federal Budget in 2007 Source: Congressional Budget Office.

27. “Everything Else”: Program Areas in the Remaining Fifth of the Budget 6% Benefits for federal retirees and veterans Scientific and medical research 3% Transportation infrastructure 2% 2% Education Non-security international 1% 3% All other Source: Office of Management and Budget data.