Short & Long Term Budget Trends presented by Robert L. Bixby, Executive Director The Concord Coalition www.concordcoalition.org
Composition of Actual FY 2007 Federal Government Revenues and Outlays (Deficit: $162 Billion) Billions of Dollars 2,750 2,500 2,250 2,000 1,750 1,500 1,250 1,000 750 500 250 0 Interest Domestic* Defense Other Entitlements Medicare & Medicaid Social Security 238 493 549 309 561 581 Outlays: $2.73 trillion 26 138 370 870 1163 Estate & Gift Taxes Other Taxes Corporate Taxes Social Insurance Taxes Individual Income Taxes Revenue: $2.57 trillion *Includes all appropriated domestic spending such as education, transportation, homeland security, housing assistance, and foreign aid. Source: CBO 2008.
Social Security, Medicare, & Medicaid as a Percentage of the Federal Budget All other Federal Spending $1.6 Trillion 58% Social Security, Medicare and Medicaid $1.1 Trillion 42% Source: Congressional Budget Office, January 2008.
Mandatory spending is consuming a growing share of the budget 1967 1987 2007 68% 26% 7% 44% 42% 38% 53% 14% 9% Mandatory Net Interest Discretionary NOTE: Numbers may not add up due to rounding. Source: Congressional Budget Office, January 2008
Outlays of Select Mandatory Spending Programs (FY 2008 Projected) $700 $600 $500 $ Billions $400 $300 $200 $100 $0 Social Security Medicare Medicaid Federal Retirement Unemployment & Disability Comp. Earned Income & Child Tax Credits Food Stamps Family Support Child Nutrition Source: Congressional Budget Office, January 2008
Automatic Growth in the Big Three Entitlements Swamps Growth of Appropriations 10 Year Growth in Social Security, Medicare and Medicaid Increase Over 2007 Level of Funding In Billions of Dollars $1,250 $1,000 $750 $500 $250 $0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Year Spending for Social Security, Medicare and Medicaid. Discretionary Spending 2009-2018 $5.9 trillion $1.9 trillion Source: Congressional Budget Office, January 2008.
Change in Composition of Discretionary Spending 1967 1987 2007 32% 68% 36% 64% 47% 53% Defense Non-defense Source: Congressional Budget Office, January 2008
10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 Defense Discretionary Spending as a Percentage of GDP 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 Source: Congressional Budget Office, January 2008 As a Percentage of GDP
Outlays of Select Discretionary Non-Defense Programs (FY 2008 Projected) $90 $80 $70 $60 $ Billions $50 $40 $30 $20 $10 $0 Education Transportation Income Security Natural Resources & Env. Veterans Foreign Aid Homeland Security Science, Space, & Technology *includes ground, air, and water Source: Congressional Budget Office, January 2008
Federal Spending vs. Revenues as a Percent of GDP (FY 1980-2007) 24% Percentage of GDP 22% 20% 18% Average outlays: 21% Average revenues: 18.3% 16% 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 Fiscal Year Revenues Total Outlays Source: Congressional Budget Office, January 2008
Percent of Debt Held by the Public Owned by Foreigners (1980-2007) 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 1987 1990 1993 1996 1999 2002 2005 Source: United States Treasury Department
Current Policy Trends Lead to Large Sustained Deficits Fiscal Years 2009-2018 Billions of Dollars -$2.3 Trillion Deficit -$7.8 Trillion Deficit 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 CBO September 2008 Baseline Fiscal Year The Concord Coalition Plausible Baseline assumes that discretionary spending grows at the rate of nominal GDP, that war costs slow gradually, and that all expiring tax provisions are extended with AMT relief. Source: Congressional Budget Office, September 2008 and Concord Coalition analysis.
Percentage of Population Aged 65 and Over 25% 20% 15% 10% 5% 0% America s Population is Aging Population age 65 and Over 2007 2012 2017 2022 2027 2032 2037 2042 2047 Year Source: Social Security and Medicare Trustees Report, April 2008
Americans are living longer and having fewer children Consequently, fewer workers are available to support each Social Security recipient 1960: 5.1 to 1 Today: 3.3 to 1 2040: 2.1 to 1 Source: Social Security Administration, April 2008
25 20 Health Care Costs are Rising Faster Than the Economy All Federal Spending In Fiscal Year 2007 Percentage of GDP 15 10 5 All Federal Revenues In Fiscal Year 2007 0 2007 2012 2017 2022 2027 2032 2037 2042 2047 2052 2057 Source: Congressional Budget Office, December 2007 Year 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.
Benefits promised far exceed dedicated tax revenues 20 Percent of Taxable Payroll 18 16 14 12 Social Security Outlays Social Security Cash Deficits Payroll Tax & Taxation of Benefits 10 2007 2013 2019 2025 2031 2037 2043 2049 2055 2061 2067 2073 2079 2085 Calendar Year Source: Social Security Trustees Report April 2008 (Intermediate Projections)
Medicare Costs Soar in the Coming Decades As a Percentage of GDP Calendar Year General Revenues required to fund the program Income from dedicated taxes, premiums, and state transfers Source: Medicare Trustees Report, 2008 17
Social Security and Medicare Part A Cumulative Cash Surpluses and Deficits In Constant 2008 Dollars 2008 through 2085 In Billions of Constant 2008 Dollars $496 Billion: Cumulative Social Security Cash Surplus -82.6 Trillion: Cumulative Social Security and Medicare Part A Cash Deficits -$27 Trillion: Cumulative Social Security Cash Deficits -$55 Trillion: Cumulative Medicare Part A Cash Deficits 2008 2010 2020 2030 2040 2050 2060 2070 2080 Calendar Year Source: Social Security Trustees Report March 2008 (Intermediate Projections) 18
Current fiscal policy is on an unsustainable path Interest All Other Average tax revenue Medicaid Medicare Social Security Source: Government Accountability Office, March 2008
Social Security, Medicare, Medicaid and Interest Consume All Federal Revenues in 20 Years 125% 100% Percentage of Revenues 75% 50% 25% 0% 2002 2007 2012 2017 2022 2027 Year Social Security, Medicare and Medicaid Interest Source: GAO. 2007.
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.
Washington Needs a Fiscal Wake-Up Call From We The People The Fiscal Wake-Up Tour consists of speakers from diverse perspectives who are increasingly alarmed by the nation s long-term fiscal outlook. Our mission is to 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.
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.