Transcript THE FISCAL CLIFF - Healthy Schools Network

The Fiscal Cliff and Beyond
Joel Packer, Principal, The Raben Group;
[email protected]
and
Executive Director, Committee for Education
Funding
HOW DID WE GET TO THE FISCAL
CLIFF?
Record Deficits Registered in Last Four Years
U.S. Deficit and Surplus
(Billions of Dollars)
Surplus
Deficit
The U.S. has long history of
budget deficits, but deficits in
last four years significantly
larger than trend
Source: Congressional Budget Office, Historical Tables.
Budget Deficit
$1.13 T in FY
2012
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Debt as Share of GDP, 1940-2050,
Under Current Policies
Source: CBPP based on Congressional Budget Office data, January 2010.
www.cbpp.org
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Fiscal Year 2012 Outlays
Education
2%
Medicaid
7%
Other
Mandatory
13%
Medicare
15%
Interest
6%
Defense
19%
Social Security
22%
EPA = 0.2%
Discretionary
nondefense
(other than
education
16%
Final FY 11 and 12 Appropriations
 FY 11 cut ED (other than Pell) by $1.2
billion.
 FY 12 total ED funding cut by $233 million.
 All programs cut by 0.189% across-the-board cut.
 EPA has been cut by $1.9 billion since FY
10.
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The Budget Control Act of 2011
How small will the box be?
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Caps and Cuts
• BCA set in law discretionary caps for ten years
(FY 12-FY 21).
• Reduced spending by more than $900 billion over ten
years.
• Supercommittee failure triggered sequestration.
• $1.2 trillion in automatic cuts between FY 13-21;
50% from defense, 50% from nondefense
• FY 13 cuts now reduced and delayed until March
1, 2013.
•
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However, other than Impact Aid, education cuts would not
start until July 2013.
Sequestration =
Largest Education Cuts Ever!
 FY 13 = fixed percentage across-the-board
cuts.
 CEF projects a cut of 5.9% = $2.9 billion for ED.
 Head Start cut $473 million.
 Pell grants exempt in first year.
 FY 14-21 – will not be ACB cut; further
lowers discretionary caps
 Squeezes education $; Pell no longer exempt.
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Impact of Sequestration in FY 13
In millions
$0
-$1
-$146
-$102
-$149
-$500
-$1,000
-$862
-$687
-$473
-$1,500
-$2,000
-$2,500
-$3,000
-$2,896
Total
Title I Teacher
Quality
IDEA Career, Student Higher
State
Tech,
Aid
ed
Grants Adult
Head
Start
Education Department Funding
In billions
Sequestration
would be lower
than FY 04!
$100
$80
$60
$40
$20
$0
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Total Discretionary
Total Discretionary w/out Pell
Sequester would cut EPA $500 million
FY 13 sequester level = $7.9
FY 2013 SEQUESTER CUTS FALL ON THE SMALLEST PIECES OF THE BUDGET
Tax Expenditures
$1,343B
Mandatory
$2,160B
Defense
Discretionary*
$729B
Domestic
Discretionary*
$504B
Cuts
$16B
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Cuts
Cuts
$27B – 32% of Sequester
Non-Defense – 50%
$43B – 50% of Sequester
Defense – 50%
* These amounts include all discretionary budgetary resources for the duration of FY 2013, not solely the non-exempt monies that are subject
to sequester. Additionally, the figures assume that a continuing resolution at FY 2012 levels is enacted for FY 2013, that war funding
(Overseas Contingency Operations funds) is provided at the level requested by the president. Defense discretionary funds include
unobligated balances from prior years, which are subject to sequester.
Sources: Congressional Budget Office, Donald Marron and Tax Policy Center using data from the Office of Management and
Budget and Treasury
WHAT’S IN THE FISCAL CLIFF
DEAL?
Raises tax rates on individuals/households earning
$400k/$450k or more
Makes Bush-era tax cuts permanent for all other taxpayers
Raises tax rates for capital gains/dividends from 15% to
20% for same incomes
Raises estate tax from 35% to 40%, with first $5M
exempted
 Phases out personal exemptions and limits itemized
deductions for individuals/households earning
$250k/$300k
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WHAT’S IN THE FISCAL CLIFF
DEAL?
Permanently indexes AMT to inflation
Extends American Opportunity Tax Credit, Child Tax
Credit, and Earned Income Tax Credit for five years
Preserves “extenders,” includes several education tax
breaks
 Allows temporary 2% payroll tax cut to expire
Extends unemployment insurance for one year
 Extends Medicare “Doc fix” for one year
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WHAT’S IN THE FISCAL CLIFF
DEAL?
• 2 month delay in sequester
• $24 billion reduction paid for with $12 billion in
revenues and $12 billion in spending cuts
• $6 billion in defense cuts and $6 billion in NDD
cuts
• Reduces across-the-board cut form 8.2% to
5.9%.
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OUTLOOK – Multiple Cliffs
 Debt Ceiling reached by end of February
 Republicans demanding more cuts
 Sequester set to hit on March 1
 Repealing entire sequester costs $960 billion.
 White House wants 50% new revenues/50% spending cuts
 Six-month CR expires on March 27, 2013
 Provides small 0.612% across-the-board increase
 Sequester cuts – if they happen – will be from CR levels.
CR has no effect on the sequester.
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2012 Debt Limit Crisis Could Lead to Default
Dec. 31, 2012
February
March 2013
Jan. 1, 2013
Debt Limit Reached
U.S. hits $16.4T debt
limit; U.S. Treasury
Secretary takes
“extraordinary
measures” to avoid
default
August
2, 2011
March
2013
August 5,
2011
Congress
Negotiates
Congress debates
how to reduce the
national debt and
whether to raise the
debt ceiling
Congress Passes
American Taxpayer
Relief Act
Sequester delayed by two
months; Congress
postpones debt reduction
deal and negotiations to
raise the debt ceiling
Possible Default on U.S.
Debt Obligations
Failure to reach a debt
reduction deal or raise the
debt ceiling could cause the
U.S. to default on debt
obligations, throwing financial
markets into a tailspin
Source: National Journal Research, 2012, “Analyst: Changes of U.S. Default Now 20%,” Damian Paletta, January 1, 2013, Wall Street Journal.
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Questions?
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