www.concordcoalition.orgTHE CONCORD

COALITION

presented by

Robert L. Bixby, Executive Director

THE CONCORD COALITION www.concordcoalition.org

Fiscal Solutions Tour: The Challenges Ahead

www.concordcoalition.orgTHE CONCORD

COALITION

Estate & Gift Taxes($18 billion)

Composition of FY 2010 Federal Government Revenues and Outlays(Deficit: $1.29 Trillion)

Interest

Domestic*

Social Security

Medicare & Medicaid

Other Entitlements

Defense

Other TaxesCorporate Taxes

Social Insurance Taxes

Individual Income Taxes

Outlays: $3.45 trillion** Revenue: $2.1 trillion*Includes all appropriated domestic spending such as education, transportation, homeland security, housing assistance and foreign aid.

**Numbers may not add due to the preliminary nature of the fiscal year numbers.

Source: CBO October 2010 and Department of Treasury 2010.

www.concordcoalition.orgTHE CONCORD

COALITION

Current Policy Trends Lead to Large Sustained DeficitsFiscal Years 2011-2020

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.

Bil

lion

s of

Dol

lars

-$15.2 Trillion Deficit

-$6.2 Trillion Deficit

www.concordcoalition.orgTHE CONCORD

COALITION

CBO August 2010 Baseline CBO’s Estimate of the President’s Budget

Federal Spending vs. Revenues as a Percent of GDP (FY 1980-2020)

CBO August Baseline Compared to the President’s Budget

Source: Congressional Budget Office, August 2010..

Average outlays: 21.0%

Average revenues: 18.3%

Per

cen

tage

of

GD

P

Actual Projected

www.concordcoalition.orgTHE CONCORD

COALITION

Percent of Debt Held by the Public Owned by Foreigners

(1987-2010)

Source: United States Treasury Department, Treasury Bulletin, September 2010.

Per

cent

age

of O

wne

rshi

p of

Pub

licl

y-H

eld

Deb

t

www.concordcoalition.orgTHE CONCORD

COALITION

Interest Costs Go Through The Roof

Source: Congressional Budget Office August 2010 and CBO’s Analysis of the President’s Budget, March 2010.

Bil

lion

s of

Dol

lars

www.concordcoalition.orgTHE CONCORD

COALITION

Factors Explaining Future Federal Spending on Medicare, Medicaid, and Social Security

Source: Congressional Budget Office, June 2010.

Percent of Growth Attributed to: 2035 2080

Health Care Cost Growth 37% 56%

Aging 63% 44%

www.concordcoalition.orgTHE CONCORD

COALITION

Debt Held by the Public as a Percent of GDP 1940-2040

Source: GAO Analysis, 2010 and OMB Historical Tables 2010.

As

a P

erce

ntag

e of

GD

P

Actual Projected

World War II108.6% 2010

63.6%

www.concordcoalition.orgTHE CONCORD

COALITION

62% 31%

7%

40%

15%

45% 39%

6%

55%

Mandatory DiscretionaryNet Interest

Source: Congressional Budget Office, August 2010.

Mandatory spending is consuming a growing share of the budget

1970 1990 2010

www.concordcoalition.orgTHE CONCORD

COALITION

Outlays of Select Non-Defense Discretionary Programs (Fiscal Year 2010)

Source: Congressional Budget Office.

*includes ground, air, and water

Education Transportation Housing, Natural Veterans Foreign Aid General Science, Energy & Resources Government Space & Nutrition Asst. Technology

www.concordcoalition.orgTHE CONCORD

COALITION

Non-Defense Discretionary Spending as a Percentage of GDP

Source: Congressional Budget Office, August 2010.

As

a P

erce

nta

ge o

f G

DP

www.concordcoalition.orgTHE CONCORD

COALITION

Defense Discretionary Spending as a Percentage of GDP

Source: Congressional Budget Office, August 2010.

As

a P

erce

nta

ge o

f G

DP

www.concordcoalition.orgTHE CONCORD

COALITION

Sources of Growth in the Federal Budget Over the Next 30 Years

Source: Government Accountability Office and Congressional Budget Office. 2010.

Individual Income Taxes = 6.5%

Current Defense Spending = 4.7%

www.concordcoalition.orgTHE 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.orgTHE 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