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Fiscal Solutions Tour: The Challenges Ahead presented by Robert L. Bixby, Executive Director THE CONCORD COALITION www.concordcoalition.org www.concordcoalition.org THE CONCORD COALITION Composition of Projected FY 2010 Federal Government Revenues and Outlays (Deficit: $1.34 Trillion) Interest Domestic* Estate & Gift Taxes ($21 billion) Defense Other Taxes Corporate Taxes Other Entitlements Social Insurance Taxes Medicare & Medicaid Individual Income Taxes Social Security Outlays: $3.49 trillion Revenue: $2.14 trillion *Includes all appropriated domestic spending such as education, transportation, homeland security, housing assistance, and foreign aid. Source: CBO August 2010. www.concordcoalition.org THE CONCORD COALITION Current Policy Trends Lead to Large Sustained Deficits Fiscal Years 2011-2020 Billions of Dollars -$6.2 Trillion Deficit -$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. www.concordcoalition.org THE CONCORD COALITION 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.. www.concordcoalition.org THE CONCORD COALITION Percent of Debt Held by the Public Owned by Foreigners Percentage of Ownership of Publicly-Held Debt (1987-2010) Source: United States Treasury Department, Treasury Bulletin, September 2010. www.concordcoalition.org THE CONCORD COALITION Billions of Dollars Interest Costs Go Through The Roof Source: Congressional Budget Office August 2010 and CBO’s Analysis of the President’s Budget, March 2010. www.concordcoalition.org THE CONCORD COALITION Factors Explaining Future Federal Spending on Medicare, Medicaid, and Social Security Percent of Growth Attributed to: 2035 2080 Health Care Cost Growth 37% 56% Aging 63% 44% Source: Congressional Budget Office, June 2010. www.concordcoalition.org THE CONCORD COALITION Debt Held by the Public as a Percent of GDP 1940-2040 300 Actual Projected As a Percentage of GDP 250 200 150 World War II 108.6% 100 2010 63.6% 50 1940 1943 1946 1949 1952 1955 1958 1961 1964 1967 1970 1973 1976 1979 1982 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020 2023 2026 2029 2032 2035 2038 0 Source: GAO Analysis, 2010 and OMB Historical Tables 2010. www.concordcoalition.org THE CONCORD COALITION Mandatory spending is consuming a growing share of the budget 1970 62% 1990 31% 40% 45% 2010 39% 55% 7% 15% Mandatory Net Interest 6% Discretionary Source: Congressional Budget Office, August 2010. www.concordcoalition.org THE CONCORD COALITION Outlays of Select Non-Defense Discretionary Programs (FY 2010 Projected) Education Transportation Housing, Natural Energy & Resources Nutrition Asst. Veterans Foreign Aid General Government Science, Space & Technology *includes ground, air, and water Source: Congressional Budget Office, January 2010. www.concordcoalition.org THE CONCORD COALITION As a Percentage of GDP Non-Defense Discretionary Spending as a Percentage of GDP Source: Congressional Budget Office, August 2010. www.concordcoalition.org THE CONCORD COALITION As a Percentage of GDP Defense Discretionary Spending as a Percentage of GDP Source: Congressional Budget Office, August 2010. www.concordcoalition.org THE CONCORD COALITION 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. www.concordcoalition.org THE CONCORD COALITION 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 www.concordcoalition.org THE CONCORD COALITION 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 www.concordcoalition.org THE CONCORD COALITION