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Fiscal Solutions Tour: The Challenges Ahead. presented by Robert L. Bixby, Executive Director THE CONCORD COALITION www.concordcoalition.org. Interest. Domestic*. Defense. Other Entitlements. Medicare & Medicaid. Social Security.
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Fiscal Solutions Tour: The Challenges Ahead presented byRobert L. Bixby, Executive Director THE CONCORD COALITIONwww.concordcoalition.org
Interest Domestic* Defense Other Entitlements Medicare & Medicaid Social Security Composition of FY 2010 Federal Government Revenues and Outlays(Deficit: $1.29 Trillion) Estate & Gift Taxes ($18 billion) Other Taxes Corporate Taxes Social Insurance Taxes Individual Income Taxes Outlays: $3.45 trillion** Revenue: $2.1 trillion *Includes all appropriated domestic spending such as education, transportation, homeland security, housing assistance and foreign aid. **Numbers may not add due to the preliminary nature of the fiscal year numbers. Source: CBO October 2010 and Department of Treasury 2010.
Current Policy Trends Lead to Large Sustained DeficitsFiscal Years 2011-2020 -$6.2 Trillion Deficit Billions of Dollars -$15.2 Trillion Deficit CBO August 2010 Baseline The Concord Coalition Plausible Baseline 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, August 2010 and Concord Coalition analysis.
Federal Spending vs. Revenues as a Percent of GDP (FY 1980-2020)CBO August Baseline Compared to the President’s Budget Actual Projected Percentage of GDP Average outlays: 21.0% Average revenues: 18.3% CBO August 2010 Baseline CBO’s Estimate of the President’s Budget Source: Congressional Budget Office, August 2010..
Percent of Debt Held by the Public Owned by Foreigners(1987-2010) Percentage of Ownership of Publicly-Held Debt Source: United States Treasury Department, Treasury Bulletin, September 2010.
Interest Costs Go Through The Roof Billions of Dollars Source: Congressional Budget Office August 2010 and CBO’s Analysis of the President’s Budget, March 2010.
Factors Explaining Future Federal Spending on Medicare, Medicaid, and Social Security Source: Congressional Budget Office, June 2010.
Debt Held by the Public as a Percent of GDP 1940-2040 Actual Projected As a Percentage of GDP World War II 108.6% 2010 63.6% Source: GAO Analysis, 2010 and OMB Historical Tables 2010.
Net Interest Discretionary Mandatory Mandatory spending is consuming a growing share of the budget 1970 1990 2010 62% 31% 40% 45% 39% 55% 7% 15% 6% Source: Congressional Budget Office, August 2010.
Outlays of Select Non-Defense Discretionary Programs (Fiscal Year 2010) Education Transportation Housing, Natural Veterans Foreign Aid General Science, Energy & Resources Government Space & Nutrition Asst. Technology *includes ground, air, and water Source: Congressional Budget Office.
Non-Defense Discretionary Spending as a Percentage of GDP As a Percentage of GDP Source: Congressional Budget Office, August 2010.
Defense Discretionary Spending as a Percentage of GDP As a Percentage of GDP Source: Congressional Budget Office, August 2010.
Sources of Growth in the Federal Budget Over the Next 30 Years Individual Income Taxes = 6.5% Current Defense Spending = 4.7% Source: Government Accountability Office and Congressional Budget Office. 2010.
Shortcomings of the Current System • There is no fiscal goal • PAYGO has large and confusing exemptions • PAYGO does not apply to automatic spending growth • Annual appropriations have no enforceable cap • Long-term costs are not accounted for • Inadequate oversight
Possible Changes • Set a fiscal goal such as debt-to-GDP ratio • Eliminate PAYGO exemptions • Set targets for major entitlement programs enforced by automatic triggers • Set multi-year enforceable spending caps • Require long-term cost estimates in the budget resolution and for major initiatives • Adopt biennial budgeting and/or “base closing” approach