Transcript I. Background on the Federal Budget and the Return of

The Federal Budget in 2009
Kris Cox
Center on Budget and Policy Priorities
Pennsylvania Budget and Policy Center Budget Summit
February 26, 2009
Composition of the
Federal Budget in 2007
Social
Security
Defense and
Security
22%
21%
18%
21%
Medicare,
Medicaid, &
SCHIP
9%
9%
Other
Safety Net
Programs
Source: Office of Management and Budget data.
Everything
Else
Interest on
the Debt
Thank You
Kris Cox
Center on Budget and Policy Priorities
[email protected]
www.cbpp.org
The Economic Recovery Package in Pennsylvania:
Selected impacts on state and local budgets
State
Medicaid, FY09………………………………………………………$1,160 million
Medicaid, FY10………………………………………………………$1,920 million
Medicaid, FY11………………………………………………………$1,000 million
“Fiscal Stabilization” – non-education (over 2 yrs) ……..$347 million
State & school districts
“Fiscal Stabilization” – education (over 2 yrs)............$1,559 million
Special education and Title I (school districts).............$970 million
American Recovery and Reinvestment Act
Signed into law February 17, 2009.
The Economic Recovery Package in Pennsylvania :
Selected impacts on vulnerable families and individuals
Unemployment insurance:
Receive increased benefits....................................1,056,058 workers
Benefit from extended eligibility...............................155,691 workers
Increased funding to support reforms.............................$292 million
Food stamps (SNAP):
Additional funding for groceries......................................$779 million
Number benefiting............................................1,261,000 individuals
Child care:
Additional funding (over 2 years)..................................$60.1 million
American Recovery and Reinvestment Act
Signed into law February 17, 2009.
46 States Facing Budget Shortfalls
Source: CBPP projections as of February 9, 2009.
Poverty Is Likely to Reach a New High
Number of poor families, in millions
Under Current Policies, Debt Will Reach
279 Percent of GDP in 2050
Source: CBPP projections based on Congressional Budget Office data and CBPP assumptions about the impact of the
recession on the federal budget.
By 2031, “Big 3” Programs Plus Defense
Would Consume All Federal Revenue
Source: CBPP projections based on Congressional Budget Office data and CBPP assumptions about the impact of the
recession on the federal budget.
Rising Health Costs, Not Demographics, are
the Main Driver of Growth in the “Big Three”
Source: CBPP projections based on Congressional Budget Office data.
Cost Growth in Medicare and Medicaid
Mirrors Health Care System As a Whole
Source: CBO Long-Term Projections, December 2007
Medicare, Medicaid, and Social Security
Expected to Rise Rapidly
Source: CBPP projections based on Congressional Budget Office data.
Long-Term Fiscal Problem
Not a General “Entitlement Crisis”
Source: CBPP projections based on Congressional Budget Office data.
Health Care Cost Containment
Would Shrink Debt Growth
Source: CBPP projections based on Congressional Budget Office data and CBPP assumptions about the impact of the
recession on the federal budget.
From Large Surpluses to
Large Deficits in Just 6 Years
Cumulative Surpluses/Deficits, 2001-2008
Trillions of dollars
$4
$2
Surplus
$3.5
$0
-$2.0
-$2
Deficit
-$4
Jan. 2001 Projection
Sept. 2008 Projection
Source: CBPP calculations based on Congressional Budget Office data.
Even Excluding Funding for the Wars, Regular Defense
and Security Funding Has Grown While Domestic
Discretionary Funding Has Hardly Increased
Share of the Economy
6%
Total
Defense
(including
war funding)
Regular
Defense
5%
4%
3%
2%
Domestic
Discretionary
1%
2008
2007
2006
2005
2004
2003
2002
2001
0%
Source: CBPP calculations based on OMB and CBO data. Defense totals exclude funding for the wars in
Iraq and Afghanistan; domestic discretionary totals include emergency and supplemental funding.
Last 26 Years Have Seen Rapid Income Growth
at the Top, Virtually No Growth at the Bottom
Growth in average real pre-tax income, 1979-2005
240%
201%
180%
120%
75%
60%
1%
10%
15%
Second
Fifth
Middle
Fifth
23%
0%
Bottom
Fifth
Fourth
Fifth
Source: CBPP calculations based on Congressional Budget Office data.
Top Fifth
Top 1%
The 2001-2007 Expansion Was Weaker Than Average;
Only Corporate Profits Grew Rapidly
12%
Average Real Growth,
2001-2007 Expansion
10%
8%
Average Real Growth,
Other Post-World War II
Expansions
6%
4%
2%
0%
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Source: CBPP calculations based on Commerce Department,
Labor Department, and Federal Reserve data.
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The Goal: Balanced Approach
To Deficit Reduction
• Balanced approach: include revenue
increases as well as spending cuts.
• Balanced approach was taken in 1990
and 1993 by Presidents Bush and
Clinton.
Likely Consequences of Unbalanced
Approach to Deficit Reduction
• Large program cuts over time.
• Federal government may be unable to
fulfill some core functions.
• More costs shifted to states.
Tax Cuts Cost More Than Most
Agency Budgets
2008 Agency Budgets, Tax Cuts in 2008
$350
$300
Billions of dollars
All tax cuts
$250
$200
$150
$100
$50
Tax cuts for Education
the top 1%
Veterans'
Affairs
Housing &
Urban
Development
EPA
$0
Source: CBPP calculations based on Office of Management and Budget, Congressional Budget Office,
Joint Committee on Taxation, and Urban-Brookings Tax Policy Center data.
Financing the
Federal Budget in 2007
Source: Congressional Budget Office.
“Everything Else”: Program Areas in the
Remaining Fifth of the Budget
Source: Office of Management and Budget data.
6%
Benefits for federal
retirees and veterans
3%
Scientific and medical
research
2%
Transportation
infrastructure
2%
Education
1%
Non-security
international
3%
All other