The FY 2015 “Budget”

The Proposals and Real Reform

Dr. Jason J. Fichtner

Senior Research Fellow

Mercatus Center

April 15, 2014

What we’re going to discuss today:

• Where we are: CBO baseline – past, present and future

• FY15 “budgets”

• What’s driving our fiscal condition

• The real bottom line

• Let’s discuss budget process reform

Overview

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CBO’s Baseline Projection - 2012

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CBO’s Baseline Projection - 2013

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FY 2014 Budget Deal

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CBO’s Baseline Projection - 2014

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0

5

10

15

20

25

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1974 1979 1984 1989 1994 1999 2004 2009 2014 2019 2024

perc

en

tag

e o

f G

DP

Total Revenues and Outlays, 1974–2024

Actual Projected

Outlays

Revenue

Source: CBO ( February 2014).

FY 2015 “Budgets”

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U.S. Government Debt

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The True Picture of U.S. Debt - Unfunded Liabilities

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The Real Source of the Problem

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Defense and Non-Defense Spending Squeezed as

Autopilot Programs Explode

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Medicare/Medicaid and Social Security

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Medicare Costs Over Time

State and Federal Medicaid Spending

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Social Security Trust Funds Annual Cash Flows

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Social Security Trust Fund Exhaustion

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Interest Costs Crowd Out Other Government Spending

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A Huge Deficit Would Remain, Even If Any One of

These Steps Were Taken:

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Source: Office of Management and Budget, The New York Times

Based on fiscal year 2010 appropriations and disclosure reports from members

of Congress who received spending earmarks for special projects.

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Can We Grow Our Way Out of Debt

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How Can We Balance the Budget

Budget Policy is Backwards – Opposite of Family Budgeting – Policy drives Budget; Not Budget drives Policy

Entitlements take up 2/3 of Budget – not much discretionary budgeting left

If Congress wants to spend…it will spend

Budget Games: PAYGO / CUTGO – 2nd best solutions

Scorecard to Zero

Emergency Spending

Phase-In, Phase-Out, Expiration

Earmarks

Balanced Budget Amendment?

Need for 2-Year Budget?

Truth in Accounting?

Bring Back Earmarks?

Sunsets?

Budget for Entitlements?

Revisit 1974 Budget Act?

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Observations and Possible Reforms

Previous Capitol Hill Campus Events on the Budget by Dr. Fichtner

2011: http://mercatus.org/video/making-federal-budget

2012: http://mercatus.org/video/behind-numbers-understanding-presidents-fy-2013-budget-submission-congress

2013: http://mercatus.org/podcast/2013/04/30/fy-2014-budget-proposals-and-where-we-go-here (podcast)

All Videos: http://mercatus.org/video/author/1000998

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Any Questions???

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