The Federal Budget: It concerns us all.

Transcription

1 The Federal Budget: It concerns us all. Phil Smith, National Political Director and Southern Regional Director

2 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-MA) and former Senator Warren Rudman (R-NH). Former Senator Sam Nunn (D-GA) became co-chair after the death of Sen. Tsongas.

3 In billions of 2012 constant (chain) dollars The Other Guy s Fiscal Policy $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $ Fiscal Years

4 Composition of Projected FY 2012 Federal Government Revenues and Outlays (Deficit: $1.17 Trillion) Interest Domestic* Defense Estate & Gift Taxes ($11 billion) Other Taxes Other Mandatory Medicare & Medicaid Corporate Taxes Social Insurance Taxes Social Security $769 $1,159 Individual Income Taxes Outlays: $3.63 trillion *Includes all appropriated domestic spending such as education, transportation, homeland security, housing assistance and foreign aid. Source: Congressional Budget Office, March Revenues: $2.46 trillion

5 Social Security, Medicare, & Medicaid as a Percentage of the Federal Budget All other Federal Spending $2.12 Trillion 58% Social Security, Medicare and Medicaid $1.51 Trillion 42% Source: Congressional Budget Office, March 2012.

6 Automatic expenditures are consuming a growing share of the budget * 2022* 56% 37% 39% 47% 36% 58% 25% 64% 7% 14% 6% 11% Mandatory Net Interest Discretionary *Projected Source: Congressional Budget Office, March 2012.

7 Sources of Growth in the Federal Budget Fiscal Years Current Individual Income Taxes = 7.3% Medicare** Current Defense Spending = 4.7% Interest Medicaid* Social Security All Other Noninterest Spending *Includes outlays for CHIP and exchange subsides. **Spending for Medicare reflects gross amounts. Beneficiaries premiums and certain other receipts used to offset a portion of spending for Medicare are included in other noninterest spending. Source: Congressional Budget Office. Long-Term Budget Outlook, Table 1-2, Alternative Fiscal Scenario, June 2011.

8 Change in Composition of Discretionary Spending 32% 68% 40% 60% 50% 50% Defense Non-defense Source: Congressional Budget Office, January 2010.

9 As a Percentage of GDP Non-Defense Discretionary Spending as a Percentage of GDP Projected Source: Congressional Budget Office, August 2011.

10 As a Percentage of GDP Defense Discretionary Spending as a Percentage of GDP Projected Source: Congressional Budget Office, August 2011.

11 Cutting Foreign Aid Will Not Balance the Budget All other Federal Spending 99% of the budget Foreign Aid 1% of the budget Source: Congressional Budget Office, January 2011.

12 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.

13 As a Percentage of GDP Debt Held by the Public as a Percent of GDP Actual Projected World War II 109% % Source: GAO Analysis, Fall 2011 and OMB Historical Tables 2011.

14 Debt held by the Public vs. Debt held by Federal Accounts Source: OMB, 2009.

15 Percentage of Ownership of Publicly-Held Debt Percent of Debt Held by the Public Owned by Foreigners ( ) Source: United States Treasury Department, Treasury Bulletin, Table OFS-2, March 2011.

16 Now let s switch gears We ve been talking about taxing and spending. They certainly have large implications for us all. But now let s talk about demographics. They are our destiny!

17 Percentage of Population Aged 65 and Over We need to prepare: We are becoming a nation of Floridas! The Aging of America. Age 65 and Over Year Source: Social Security and Medicare Trustees Report, 2011.

18 We are getting older as a country and we are having fewer children Consequently, fewer workers are available to support each Social Security recipient 1960: 5.1 to 1 Today: 3.1 to : 2.2 to 1 Source: Social Security Administration, April 2009.

19 Factors Explaining Future Federal Spending on Medicare, Medicaid, and Social Security Percent of Growth Attributed to: Health Care Cost Growth 36% 56% Aging 64% 44% Source: Congressional Budget Office, June 2010 & 2011.

20 Percent of Taxable Payroll Benefits Promised Far Exceed Dedicated Tax Revenues Social Security Outlays Social Security Cash Deficits Payroll Tax & Taxation of Benefits Calendar Year Source: Social Security Trustees Report May 2012 (Intermediate Projections).

21 Percentage of GDP Federal Health Care Spending Under Current Law 2010 Projection 2011 Projection 2011 Projection 2010 Projection Excluding Effects of Recent Health Care Legislation Source: Congressional Budget Office, June 2010.

22 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 22

23 Other Costs of Deficits Deficits raise uncertainty about future policies Deficits undermine budget discipline 23

24 Groups like the Concord Coalition are educating We The People Concord works with experts from diverse perspectives who are increasingly alarmed by the nation s long-term fiscal outlook. Our mission is to give speeches just like this and cut through the usual partisan rhetoric and stimulate a more realistic public dialogue on what we want our nation s future to look like, along with the required trade-offs. Elected leaders in Washington know there is a problem, but they are unlikely to act unless their constituents We The People demand it.

25 Key Points of Agreement Experts of widely diverse perspectives 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 just about numbers. It is a moral issue.

26 Super Committee 12 members tasked with identifying an additional $1.5 trillion in deficit reduction. They were to report by Nov. 23 rd with a fast-tracked amendment-free vote in both chambers by Dec. 23 rd. Failure to report means across the board spending cuts beginning on January 1, Cuts split equally between defense and non-defense and will exempt Social Security and low-income programs and limit Medicare cuts to 2%. THE SUPER COMMITTEE FAILED-next up- Triggers

27 The Trigger: What Gets Cut? Source: Congressional Budget Office, 2011.

28 Long-Term Solutions Mandatory spending drives the long-term problems. The longer we wait to reform Mandatory Spending, the more we will be forced to cut the ever shrinking Discretionary budget such as: Education, Transportation infrastructure, Science, Space, Technology, homeland security, and housing assistance. Without reform, these will all be cut.

29 Long-Term Solutions Social Security: Solutions are known, the political will is lacking. Raise the Age slowly, over time (over 30 years) and grandfather people in who are over 55. Raise the taxable wage cap on income ($110,100) Increase the benefit for the truly needy Add an automatic savings account

30 Long-Term Solutions An honest discussion on health care. Practice preventative medicine Catastrophic coverage We are the only industrialized country on Earth that writes a blank check for health care. We need a health care budget. We need to pay for outcomes not activities. We need reasonable malpractice reform

31 Long-Term Solutions Tough Budget Controls- restore the expired rules in the 1990 s that led us to a balanced budget. Process reforms- Biennial Budgeting (Isakson- Shaheen)

32 Long-Term Solutions Tax Reform- It s a 3 to 1 spending problem but we still need to do something on the tax side. We ve gone too far for too long without reform, it s too late to only look spending. We need a simpler, fairer, more equitable tax system. Maybe Congressmen should do their own taxes then I bet we d get reform! Reformers say we need to broaden the base and limit tax expenditures. Then we can reduce marginal rates to 25%

33 Long-Term Solutions National Defense is vital. This is one area where we almost all agree. However, there is some room for savings in Defense. Former Comptroller General David Walker says that Pentagon spending is a bloated bureaucracy. We cannot write a blank check to any part of the government, even defense. That s how you get $400 hammers and $800 toilet seats. We spend more than the top 15 nations COMBINED on defense.

34 Long-Term Solutions Our nation needs a strategic plan. As long as we don t have one, everyone will be playing dodgeball until eventually we will suffer catastrophic hits. This strategic plan needs to be future focused, outcome oriented, affordable and sustainable over time. We have a framework for reform in Simpson/Bowles and the work of the Gang of Six Chambliss/Warner

35 U.S. Fiscal Policy: If it s always darkest before the dawn, The sun should be coming up any minute. PSmith@concordcoalition.org