the federal budget in 2009 kris cox center on budget and policy priorities pennsylvania budget and...
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The Federal Budget in 2009
Kris CoxCenter on Budget and Policy Priorities
Pennsylvania Budget and Policy Center Budget Summit
February 26, 2009
OtherSafety NetPrograms
Medicare, Medicaid, &
SCHIP
Social Security Defense and
Security
Everything Else
Interest on the Debt
22%21%
21%
9%9%
18%
Composition of the Composition of the Federal Budget in 2007Federal Budget in 2007
Source: Office of Management and Budget data.
Thank You
Kris CoxCenter on Budget and Policy Priorities
The Economic Recovery Package in The Economic Recovery Package in Pennsylvania:Pennsylvania: Selected impacts on state and local budgetsSelected impacts on state and local budgets
StateState
Medicaid, FY09Medicaid, FY09………………………………………………………………………………………………………………$1,160 million$1,160 million
Medicaid, FY10Medicaid, FY10………………………………………………………………………………………………………………$1,920 million$1,920 million
Medicaid, FY11Medicaid, FY11………………………………………………………………………………………………………………$1,000 million$1,000 million
“ “Fiscal Stabilization” – non-education (over 2 yrs) Fiscal Stabilization” – non-education (over 2 yrs) ……..……..$347 $347 millionmillion
State & school districtsState & school districts
“ “Fiscal Stabilization” – education (over 2 yrs)Fiscal Stabilization” – education (over 2 yrs)........................$1,559 $1,559 millionmillion
Special education and Title I (school districts)Special education and Title I (school districts)..........................$970 $970 millionmillion
American Recovery and Reinvestment ActAmerican Recovery and Reinvestment ActSigned into law February 17, 2009.Signed into law February 17, 2009.
The Economic Recovery Package in The Economic Recovery Package in Pennsylvania :Pennsylvania : Selected impacts on vulnerable families and Selected impacts on vulnerable families and individualsindividuals
Unemployment insurance:Unemployment insurance:
Receive increased benefitsReceive increased benefits........................................................................1,056,058 1,056,058 workersworkers
Benefit from extended eligibilityBenefit from extended eligibility..............................................................155,691 155,691 workersworkers
Increased funding to support reformsIncreased funding to support reforms..........................................................$292 $292 millionmillion
Food stamps (SNAP):Food stamps (SNAP):
Additional funding for groceriesAdditional funding for groceries............................................................................$779 $779 millionmillion
Number benefitingNumber benefiting........................................................................................1,261,000 1,261,000 individualsindividuals
Child care:Child care:
Additional funding (over 2 years)Additional funding (over 2 years)....................................................................$60.1 $60.1 millionmillion
American Recovery and Reinvestment ActAmerican Recovery and Reinvestment ActSigned into law February 17, 2009.Signed into law February 17, 2009.
46 States Facing Budget Shortfalls46 States Facing Budget Shortfalls
Source: CBPP projections as of February 9, 2009.
Poverty Is Likely to Reach a New HighPoverty Is Likely to Reach a New HighNumber of poor families, in millionsNumber of poor families, in millions
Under Current Policies, Debt Will Under Current Policies, Debt Will Reach Reach
279 Percent of GDP in 2050 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 By 2031, “Big 3” Programs Plus Defense Defense
Would Consume All Federal RevenueWould 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 Rising Health Costs, Not Demographics, are the Main Demographics, are the Main Driver of Growth in the “Big Driver of Growth in the “Big
Three”Three”
Source: CBPP projections based on Congressional Budget Office data.
Source: CBO Long-Term Projections, December 2007
Cost Growth in Medicare and Cost Growth in Medicare and Medicaid Mirrors Health Care Medicaid Mirrors Health Care
System As a WholeSystem As a Whole
Medicare, Medicaid, and Social Medicare, Medicaid, and Social Security Expected to Rise RapidlySecurity Expected to Rise Rapidly
Source: CBPP projections based on Congressional Budget Office data.
Long-Term Fiscal Problem Long-Term Fiscal Problem Not a General “Entitlement Crisis”Not a General “Entitlement Crisis”
Source: CBPP projections based on Congressional Budget Office data.
Health Care Cost Containment Health Care Cost Containment Would Shrink Debt GrowthWould 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 From Large Surpluses to Large Deficits in Just 6 YearsLarge Deficits in Just 6 Years
$3.5
-$2.0
-$4
-$2
$0
$2
$4
Jan. 2001 Projection Sept. 2008 Projection
Tri
llio
ns
of
do
llar
s
Cumulative Surpluses/Deficits, 2001-2008
Source: CBPP calculations based on Congressional Budget Office data.
Surplus
Deficit
Even Excluding Funding for the Wars, Regular Defense
and Security Funding Has Grown While Domestic Discretionary Funding Has Hardly
Increased
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.
Sh
are
of
the
Eco
no
my
0%
1%
2%
3%
4%
5%
6%2
00
1
20
02
20
03
20
04
20
05
20
06
20
07
20
08
TotalDefense(includingwar funding)RegularDefense
DomesticDiscretionary
Last 26 Years Have Seen Rapid Last 26 Years Have Seen Rapid Income Growth at the Top, Virtually Income Growth at the Top, Virtually
No Growth at the BottomNo Growth at the Bottom
1%10% 15%
23%
75%
201%
0%
60%
120%
180%
240%
BottomFifth
SecondFifth
MiddleFifth
FourthFifth
Top Fifth Top 1%
Source: CBPP calculations based on Congressional Budget Office data.
Growth in average real pre-tax income, 1979-2005
The 2001-2007 Expansion Was Weaker Than The 2001-2007 Expansion Was Weaker Than Average; Only Corporate Profits Grew Average; Only Corporate Profits Grew
RapidlyRapidly
0%
2%
4%
6%
8%
10%
12%
GDP
Consumption
Investment
Net Worth
Wages and Salaries
Employment
Corporate Pro
fits
Average Real Growth, 2001-2007 Expansion
Average Real Growth,Other Post-World War II
Expansions
Source: CBPP calculations based on Commerce Department, Labor Department, and Federal Reserve data.
The Goal: The Goal: BalancedBalanced Approach Approach
To Deficit ReductionTo 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 Likely Consequences of UnUnbalanced Approach to balanced Approach to
Deficit ReductionDeficit 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 MostTax Cuts Cost More Than MostAgency BudgetsAgency Budgets
Source: CBPP calculations based on Office of Management and Budget, Congressional Budget Office, Joint Committee on Taxation, and Urban-Brookings Tax Policy Center data.
2008 Agency Budgets, Tax Cuts in 2008
Tax cuts for the top 1%
Veterans' Affairs
All tax cuts
Education Housing & Urban
Development
EPA$0
$50
$100
$150
$200
$250
$300
$350
Bil
lio
ns
of
do
llar
s
Financing the Financing the Federal Budget in 2007Federal Budget in 2007
Source: Congressional Budget Office.
““Everything Else”: Program Areas Everything Else”: Program Areas in the Remaining Fifth of the in the Remaining Fifth of the
BudgetBudget
Source: Office of Management and Budget data.
6%
3%
Benefits for federal retirees and veterans
Education
2%
Scientific and medical research
2%
Transportation infrastructure
1% Non-security international
3% All other