US Debt And Deficits In Pictures: 5 Charts From The 2011 Budget Chart Book
2011 Budget Chart Book
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Budget Chart Book2011
The Federal Budget in Pictures
The Entitlements Initiative is one of 10 Transformational Initiatives making up The Heritage Foundation’s Leadership for America campaign. For more products and information related to this initiative or to learn more about the Leadership for America campaign, please visit heritage.org.
The Heritage Foundation is a research and educational institution—a think tank—whose mission is to formulate and promote conservative public policies based on the principles of free enterprise, limited government, individual freedom, traditional American values, and a strong national defense.
Our vision is to build an America where freedom, opportunity, prosperity, and civil society flourish. As conservatives, we believe the values and ideas that motivated our Founding Fathers are worth conserving. As policy entrepreneurs, we believe the most effective solutions are consistent with those ideas and values.
214 Massachusetts Avenue, NE • Washington, D.C. 20002 • (202) 546-4400 • heritage.org
Copyright © 2011 The Heritage Foundation
The Thomas A. Roe Institute for Economic Policy Studies
The Federal Budget in Pictures
2011 Budget Chart Book
Page iii iii
The federal budget is on an unsustainable course, with even more runaway spending and rising debt on the horizon. Now, more than ever, it is important for Americans to understand what our nation’s spending, taxes, and debt mean to them. The Heritage Foun-dation’s Budget Chart Book is a user-friendly way to learn about the federal budget through pictures.
Federal spending was on the rise prior to the eco-nomic recession and passage of the 2009 stimulus bill, and it continues to climb steeply under President Obama. As illustrated on page 2, Federal Spending per Household Is Skyrocketing, and on page 3, Federal Spending Is Growing Faster Than Federal Revenue.
Some policymakers would pay for increased spend-ing with tax hikes. However, taxes have already risen to burdensome levels and will reach unprecedented heights. As explained on page 15, The Top 10 Percent of Earners Paid 70 Percent of Federal Income Taxes, and on page 21, Total Tax Burden Is Rising to Highest Level in History.
Record deficits will be the norm as spending con-tinues to grow faster than revenue. Absent spending
cuts and serious entitlement reforms, debt will ap-proach dangerous levels and further strain the econo-my. As emphasized on page 29, Federal Budget Deficits Will Reach Levels Never Seen Before in the U.S., and page 31, U.S. Debt on Track to Fuel Economic Crisis.
America is poised on a precipice of disastrous defi-cits due primarily to spending on the three major en-titlement programs—Social Security, Medicare, and Medicaid. Entitlement spending is growing and bold reforms are necessary to fix this massive problem. As shown on page 37, Entitlement Spending Will More Than Double by 2050, and on page 48, The Heritage Plan Keeps Spending Low and Ends Deficits Without Rais-ing Taxes.
Tough policy choices and strong entitlement re-forms are essential to get the federal budget back on track. The Budget Chart Book will help you un-derstand the current fiscal situation, and it will help Americans to appreciate the magnitude of the deci-sions that policymakers must enact to protect Ameri-ca’s fiscal future.
About the Budget Chart Book
v
PageFEDERAL SPENDING Federal Spending per Household Is Skyrocketing .................................................................................................2 Federal Spending Is Growing Faster Than Federal Revenue .................................................................................3 Federal Spending Grew More Than Ten Times Faster Than Median Income ........................................................4 Federal Spending Is Outpacing Inflation ...............................................................................................................5 Total Government Spending Has More Than Doubled Since 1965 .......................................................................6 Mandatory Spending Has Increased Five Times Faster Than Discretionary Spending ..........................................7 Defense Spending Has Declined While Entitlement Spending Has Increased .......................................................8 Obama’s Budget Would Reduce National Defense Spending .................................................................................9 More Than Half of the President’s Budget Would Be Spent on Entitlement Programs .........................................10 Total Welfare Spending Is Rising Despite Attempts at Reform .............................................................................11 Runaway Spending, Not Inadequate Tax Revenue, Is Responsible for Future Deficits ........................................12
FEDERAL REVENUE Taxes per Household Have Risen Dramatically ....................................................................................................14 The Top 10 Percent of Earners Paid 70 Percent of Federal Income Taxes ...........................................................15 Federal Revenues Have More Than Tripled Since 1965 ......................................................................................16 Federal Revenues by Source ................................................................................................................................17 Tax Receipts Return to Historical Average............................................................................................................18 Increasing Tax Rates Does Not Necessarily Lead to Higher Income Tax Receipts ................................................19 U.S. Corporate Tax Rate Is Uncompetitive...........................................................................................................20 Total Tax Burden Is Rising to Highest Level in History ........................................................................................21
Table of Contents
viDEBT AND DEFICITS National Debt Set to Skyrocket ............................................................................................................................24 Each American’s Share of National Debt Is Growing ...........................................................................................25 Obama’s Budget Would Send Federal Debt to Levels Not Seen Since World War II ............................................26 Obama’s Budget Worsens Debt Problem, but The Heritage Plan Solves It ...........................................................27 Obama’s Budget Would Deepen Already Unprecedented Deficits .......................................................................28 Federal Budget Deficits Will Reach Levels Never Seen Before in the U.S. ...........................................................29 Rising Deficits Drive U.S. Debt Limit Higher, Faster ...........................................................................................30 U.S. Debt on Track to Fuel Economic Crisis ........................................................................................................31 Net Interest Spending Will More Than Triple Over the Next Decade ..................................................................32 In One Year, Spending on Interest on the National Debt Is Greater Than Funding for Most Programs ..............33
ENTITLEMENTS Entitlements Will Consume All Tax Revenues by 2049 .......................................................................................36 Entitlement Spending Will More Than Double by 2050 .....................................................................................37 Medicare Spending Is Adding to Future Deficits Faster Than Other Program Spending .....................................38 Without Entitlement Reform, Federal Spending Could Consume One-Half of the Economy by 2056 ..............39 Letting Tax Cuts Expire Will Not Balance the Budget ..........................................................................................40 Hiking Taxes to Pay for Entitlements Would Require Doubling Tax Rates ..........................................................41 Taxing the Wealthy to Cover Future Deficits Won’t Work ...................................................................................42 Balancing the Budget Without Cutting Spending Would Cause Taxes to Skyrocket ..........................................43 Discretionary Spending Cuts Alone Are Not an Adequate Substitute for Entitlement Reform ............................44 Even Eliminating Vital Defense Spending Completely Would Not Solve the Entitlement Spending Problem.....45 The Alternative: Saving the American Dream ......................................................................................................46 The Heritage Plan Would Reverse Trajectory of Unsustainable Debt ...................................................................47 The Heritage Plan Keeps Spending Low and Ends Deficits Without Raising Taxes .............................................48
Spending has risen to unprecedented levels, threatening limited government and economic freedom.
Federal Spending
heritage.org• 2011 Budget Chart BookFederal Spending Chart 7
Heritage Foundation calculations based on Congressional Budget O ffice data.Source:
PERCENTAGE OF GDP
Percentage of GDP
runaway-spending-tax-revenue
The main driver behind long-term deficits is government spending—not low revenues. While revenue will surpass its historical average of 18.0 percent of GDP by 2021, spending will shoot past its historical average of 20.3 percent, reaching 26.4 percent in the same year.
Runaway Spending, Not Inadequate Tax Revenue, Is Responsible for Future Deficits
10%
15%
20%
25%
30%
1960 1970 1980 1990 2000 2010 2021
Projected
Spending20.3%
Revenue18.0%
Averages for 1960–2009:
24.7%26.4%
14.8%
18.4%
Spending
Revenue
heritage.or• 2011 Budget Chart BookFederal Spending Chart 4
W hite House O ffice of M anagem ent and Budget.Source:
INFLATION-ADJUSTED TRILLIONS OF DOLLARS (2010)
Inflation-Adjusted Billions of Dollars (2010)
mandatory-discretionary-spending
Only one-third of the federal budget, discretionary spending, is subject to annual budgets. The remainder, mandatory spending, is set on autopilot without congressional debate and has increased more than five times faster than discretionary spending. Most of the current increase is due to entitlement spending.
Mandatory Spending Has Increased Five Times Faster Than Discretionary Spending
$0
$0.5 trillion
$1.0 trillion
$1.5 trillion
$2.0 trillion
$2.5 trillion
$3.0 trillion
$3.5 trillion
$4.0 trillion
$609 billion
$3.6 trillion
1965 1970 1975 1980 1985 1990 1995 2000 20052011 figures are estimates
2010
Mandatory Spending
Discretionary Spending
$609 billion$609billion$$ oobb660099 nnllililiililioo6600$$$609billi
$3.6 trillion
atory Mandaatory an atand rM odaandadingSpend
yygp gS dde nn ip dd ge i
ionary Discreti ascret nD i ri r ioD ae ii ti
heritage.org• 2011 Budget Chart BookFederal Spending Chart 6
W hite House O ffice of M anagem ent and Budget.Source:
PERCENTAGE OF THE PRESIDENT’S FY2012 BUDGET
Percentage of the Presidents FY2012 Budget
budget-entitlement-programs
In combination with other entitlements, Medicare, Medicaid, and Social Security constitute the lion’s share of President Obama’s 2012 budget. In contrast, spending on foreign aid represents 2 percent.
More Than Half of the President's Budget Would Be Spent on Entitlement Programs
Entitlement Programs: 58%SocialSecurity:20%
Medicareand Medicaid:
20%
Income Security and O ther
Entitlements: 18%
National Defense: 19%
Net Interest:6%
Education: 3%
Foreign Aid: 2%
All O ther Spending:12%
50%
N ote: Figures have been rounded.
Page 2
heritage.org• 2011 Budget Chart BookFederal Spending Chart 1
U.S. Census Bureau, White House Office of Management and Budget, and Congressional Budget Office.Source:
INFLATION-ADJUSTED DOLLARS (2010)
Inflation-Adjusted Dollars (2010)
federal-spending-per-household
The federal government is spending more per household than ever before. Since 1965, spending per household has grown by nearly 162 percent, from $11,431 in 1965 to $29,401 in 2010. From 2010 to 2021, it is projected to rise to $35,773, a 22 percent increase.
Federal Spending per Household Is Skyrocketing
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
ProjectedActual
$35,773$29,401
$11,431
Page 3
heritage.org• 2011 Budget Chart BookFederal Spending Chart 2
White House Office of Management and Budget.Source:
INFLATION-ADJUSTED TRILLIONS OF DOLLARS (2010)
Inflation-Adjusted Billions of Dollars (2010)
growth-federal-spending-revenue
Since 1965, spending has risen constantly. Federal revenues have dropped recently due to the economic recession, but spending has reached a record high.
Federal Spending Is Growing Faster Than Federal Revenue
$0
$1 trillion
$2 trillion
$3 trillion
$4 trillion
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
2011figures areestimates
Est. 2011 deficit:$1.62 trillion
Spending
Revenue
$3.77 trillion
$2.15 trillion
Page 4
heritage.org• 2011 Budget Chart BookFederal Spending Chart 3
U.S. Census Bureau and White House Office of Management and Budget.Source:
PERCENT CHANGE OF INFLATION-ADJUSTED DOLLARS (2010)
Percent Change of Inflation-Adjusted Dollars (2010)
growth-federal-spending
When federal spending grows faster than Americans’ paychecks, the burden on taxpayers becomes greater. Over the past few decades, middle-income Americans’ earnings have risen only 27 percent, while spending has increased 299 percent.
Federal Spending Grew More Than Ten Times Faster Than Median Income
0%
50%
100%
150%
200%
250%
300% 1970 $890 billion2009 $3,551 billion
+299%
Median Household
Income
Total Federal Spending
Median Household
Income
Total Federal Spending
1970 $39,7322009 $50,255
+27%
1970 1975 1980 1985 1990 1995 2000 2005 2009
Page 5
heritage.org• 2011 Budget Chart BookFederal Spending Chart 4
U.S. Bureau of Labor Statistics and White House Office of Management and Budget.Source:
YEAR-TO-YEAR PERCENTAGE CHANGE
Year-to-Year Percentage Change
federal-spending-inflation
Prices of goods and services normally rise year to year, but federal spending has risen even faster. Although spending grew substantially after 9/11, less than half of the increase can be attributed to defense and homeland security spending.
Federal Spending Is Outpacing Inflation
0%
5%
10%
15%
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
+7.9%+7.4%
+6.2%
+7.8%+7.4%
+17.9%
2010
–1.7%
Federal Spending
Inflation
Average Change in Federal
Spending:
+5.3%
Average Change in Inflation:
+2.5%
+9.3%+9.3%
Page 6
heritage.org• 2011 Budget Chart BookFederal Spending Chart 5
U.S. Census Bureau, White House Office of Management and Budget, and 2011 Economic Report of the President.Source:
PER-HOUSEHOLD SPENDING, IN INFLATION-ADJUSTED DOLLARS (2010)
Per-Household Spending, In Inflation-Adjusted Dollars (2010)
total-government-spending
State and local government spending per household imposes a significant, and growing, burden on taxpayers on top of federal spending. In 1970, median household income was $17,839 greater than total government spending per household, compared to only $2,431 in 2009.
Total Government Spending Has More Than Doubled Since 1965
$0
$10,000
$20,000
$30,000
$40,000
$50,000 Median household income: $50,255Per-household spending: $47,824
Median household income: $39,732
1965
2009
Per-household spending: $21,893
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
State and Local Spending
FederalSpending
Page 7
heritage.org• 2011 Budget Chart BookFederal Spending Chart 6
White House Office of Management and Budget.Source:
INFLATION-ADJUSTED TRILLIONS OF DOLLARS (2010)
Inflation-Adjusted Billions of Dollars (2010)
mandatory-discretionary-spending
Only one-third of the federal budget, discretionary spending, is subject to annual budgets. The remainder, mandatory spending, is set on autopilot without congressional debate and has increased more than five times faster than discretionary spending. Most of the current increase is due to entitlement spending.
Mandatory Spending Has Increased Five Times Faster Than Discretionary Spending
$0
$0.5 trillion
$1.0 trillion
$1.5 trillion
$2.0 trillion
$2.5 trillion
$3.0 trillion
$3.5 trillion
$4.0 trillion
$609 billion
$3.6 trillion
1965 1970 1975 1980 1985 1990 1995 2000 20052011 figures are estimates
2010
Mandatory Spending
Discretionary Spending
Page 8
heritage.org• 2011 Budget Chart BookFederal Spending Chart 7
White House Office of Management and Budget.Source:
PERCENTAGE OF GDP
Percentage of GDP
defense-entitlement-spending
Spending on national defense, a core constitutional function of government, has declined significantly over time, despite wars in Iraq and Afghanistan. Spending on the three major entitlements—Social Security, Medicare, and Medicaid—has more than tripled.
Defense Spending Has Declined While Entitlement Spending Has Increased
2%
4%
6%
8%
10%
National Defense
Entitlements(Social Security,
Medicare, Medicaid)
7.4%
2.5%
10%
5%
1976 was the first year entitlement spending exceeded defense spending
1976 was the first year entitlement spending exceeded defense spending
1965 1970 1975 1980 1985 1990 1995 2000 2005 20102011 figures are estimates
Page 9
heritage.org• 2011 Budget Chart BookFederal Spending Chart 8
White House Office of Management and Budget.Source:
DEFENSE SPENDING AS A PERCENTAGE OF GDP
Defense Spending as a Percentage of GDP
national-defense-spending
Adequate funding for the core defense program is crucial for the military to fulfill its constitutional duty to provide for the common defense. Yet defense spending has fallen below its 45-year historical average despite ongoing operations in Iraq and Afghanistan.
Obama’s Budget Would Reduce National Defense Spending
0%
2%
4%
6%
8%
10% 9.5%
6.2%
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Actual
45-Year Average: 5.2%
Projected
5.0% 3.4%
Page 10
heritage.org• 2011 Budget Chart BookFederal Spending Chart 9
White House Office of Management and Budget.Source:
PERCENTAGE OF THE PRESIDENT’S FY2012 BUDGET
Percentage of the Presidents FY2012 Budget
budget-entitlement-programs
In combination with other entitlements, such as food stamps, unemployment, and housing assistance, Medicare, Medicaid, and Social Security constitute the lion’s share of President Obama’s 2012 budget. In contrast, spending on foreign aid represents 2 percent.
More Than Half of the President’s Budget Would Be Spent on Entitlement Programs
Entitlement Programs: 58%
SocialSecurity:
20%
Medicareand Medicaid:
20%
Income Security and Other
Entitlements: 18%
National Defense:
19%
Net Interest:
6%
Education: 3%
Foreign Aid: 2%
All Other Spending:
12%
50%Note: Figures have been rounded.
Page 11
heritage.org• 2011 Budget Chart BookFederal Spending Chart 10
Heritage Foundation calculations based on data from current and previous White House Office of Management and Budget documents and other official government sources.
Source:
WELFARE SPENDING IN INFLATION-ADJUSTED DOLLARS (2010)
Spending in Billions of Dollars (2010)
welfare-spending
Total means-tested welfare spending (cash, food, housing, medical care, and social services for the poor) has increased 17-fold since the beginning of Lyndon Johnson’s War on Poverty in 1964. Though the current trend is unsustainable, the Obama Administration plans to increase future welfare spending rather than enact true policy reforms.
Total Welfare Spending Is Rising Despite Attempts at Reform
$0
$100 billion
$200 billion
$300 billion
$400 billion
$500 billion
$600 billion
$700 billion
$800 billion
$900 billion
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
1964War onPovertybegins
1981Reagan
“slashes”welfare
1996Reform“ends
welfare”
$890 billion$890 billion
Page 12
heritage.org• 2011 Budget Chart BookFederal Spending Chart 11
Heritage Foundation calculations based on Congressional Budget Office data.Source:
PERCENTAGE OF GDP
Percentage of GDP
runaway-spending-tax-revenue
The main driver behind long-term deficits is government spending—not low revenues. While revenue will surpass its historical average of 18.0 percent of GDP by 2021, spending will shoot past its historical average of 20.3 percent, reaching 26.4 percent in the same year.
Runaway Spending, Not Inadequate Tax Revenue, Is Responsible for Future Deficits
10%
15%
20%
25%
30%
1960 1970 1980 1990 2000 2010 2021
Projected
Spending20.3%
Revenue18.0%
Averages for 1960–2009:
24.7%
26.4%
14.8%
18.4%
Spending
Revenue
The tax burden in America is climbing and will reach record levels without policy changes.
Federal Revenue
heritage.org• 2011 Budget Chart BookFederal Revenue Chart 2
Tax Foundation and Internal Revenue Service.Source:
PERCENTAGE OF FEDERAL INCOME TAXES (2008)
Percentage of Federal Income Taxes (2008)
top10-percent-income-earners
Top earners are the target for new tax increases, but the U.S. tax system is already highly progressive. The top 1 percent of income earners paid 38 percent of all federal income taxes in 2008, while the bottom 50 percent paid only 3 percent. Forty-nine percent of U.S. households paid no federal income tax at all.
The Top 10 Percent of Earners Paid 70 Percent of Federal Income Taxes
This Level of Income Earners ...
... Paid This Proportion of the Federal Income Tax in 2008.
Bottom 50%
3%
26%–50%
11%
11%–25%
16%
6%–10%
11%
2%–5%
21%
Top 1%
38%
heritage.or• 2011 Budget Chart BookFederal Revenue Chart 5
O rganisation for Econom ic Co-operation and Developm ent.Source:
COMBINED CORPORATE TAX RATES
Combined Corporate Tax Rates (2000-2010)
corporate-tax-rate
High U.S. federal and state corporate tax rates make it difficult for businesses to compete internationally. While other countries are reducing corporate tax rates, the U.S. has maintained rates significantly and consistently higher than the average of industrialized nations.
U.S. Corporate Tax Rate Uncompetitive
25%
30%
35%
40%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
United States: 39%
OECDAverage
United States: 39%
OECDAverage
32.9%31.9%
30.7%30.2%
29.3%28.2%
27.6% 27.2%26.2% 26.0% 26.0%
heritage.org• 2011 Budget Chart BookFederal Revenue Chart 3
Congressional Budget O ffice.Source:
PERCENTAGE OF TOTAL FEDERAL REVENUE (2010)
Percentage of Total Federal Revenue (2010)
federal-revenue-sources
Most federal revenues come from individuals. Personal income taxes provide the largest portion of total tax revenues, though some of this is small-business income. Social Security and Medicare payroll taxes are the second-largest source.
Federal Revenues by Source
Individual($898.5 billion)
Payroll Taxes($864.8 billion)
Customs Duties, Misc.: 5.6% ($121.2 billion) Corporate: 8.9% ($191.4 billion)
Excise: 3.1% ($66.9 billion) Estate and Gift: 0.9% ($18.9 billion)
41.6% 40.0%
Page 14
heritage.org• 2011 Budget Chart BookFederal Revenue Chart 1
U.S. Census Bureau and White House Office of Management and Budget.Source:
INFLATION-ADJUSTED DOLLARS (2010)
Inflation-Adjusted Dollars (2010)
taxes-per-household
Though the economic downturn has temporarily lowered overall tax revenues, the tax burden on Americans is still high.
Taxes per Household Have Risen Dramatically
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$11,295
$24,147 $18,400
$17,959
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Current levels higher than 1994
Page 15
heritage.org• 2011 Budget Chart BookFederal Revenue Chart 2
Tax Foundation and Internal Revenue Service.Source:
PERCENTAGE OF FEDERAL INCOME TAXES (2008)
Percentage of Federal Income Taxes (2008)
top10-percent-income-earners
Top earners are the target for new tax increases, but the U.S. tax system is already highly progressive. The top 1 percent of income earners paid 38 percent of all federal income taxes in 2008, while the bottom 50 percent paid only 3 percent. Forty-nine percent of U.S. households paid no federal income tax at all.
The Top 10 Percent of Earners Paid 70 Percent of Federal Income Taxes
This Level of Income Earners ...
... Paid This Proportion of
the Federal Income Tax
in 2008.
Bottom 50%
3%
26%–50%
11%
11%–25%
16%
6%–10%
11%
2%–5%
21%
Top 1%
38%
Page 16
heritage.org• 2011 Budget Chart BookFederal Revenue Chart 3
White House Office of Management and Budget.Source:
INFLATION-ADJUSTED DOLLARS (2010)
Inflation-Adjusted Billions of Dollars (2010)
federal-government-revenues
Overall tax revenues have risen despite a recent decline due to the recession. Congress cut income taxes and the death tax in 2001 and capital gains taxes and dividends in 2003, yet revenues continued to surge even after the tax cuts were passed.
Federal Revenues Have More Than Tripled Since 1965
$0
$0.5 trillion
$1.0 trillion
$1.5 trillion
$2.0 trillion
$2.5 trillion
$3.0 trillion $2.15 trillion
$944 billion
$196 billion
Corporate Taxes
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
2011 figure estimated
Total Revenue
IndividualIncome Taxes
Total Revenue
IndividualIncome Taxes
Page 17
heritage.org• 2011 Budget Chart BookFederal Revenue Chart 4
Congressional Budget Office.Source:
PERCENTAGE OF TOTAL FEDERAL REVENUE (2010)
Percentage of Total Federal Revenue (2010)
federal-revenue-sources
Most federal revenues come from individuals. Personal income taxes provide the largest portion of total tax revenues, though some of this is small-business income. Social Security and Medicare payroll taxes are the second-largest source.
Federal Revenues by Source
Individual($898.5 billion)
Payroll Taxes($864.8 billion)
Customs Duties, Misc.: 5.6% ($121.2 billion)
Corporate: 8.9% ($191.4 billion)
Excise: 3.1% ($66.9 billion)
Estate and Gift: 0.9% ($18.9 billion)
41.6% 40.0%
Page 18
heritage.org• 2011 Budget Chart BookFederal Revenue Chart 5
White House Office of Management and Budget.Source:
TAX RECEIPTS AS A PERCENTAGE OF GDP
Tax Receipts as a Percentage of GDP
current-tax-receipts
The overall tax burden on Americans is measured as a share of gross domestic product (GDP). Since World War II, tax receipts have averaged around 18 percent of GDP. Receipts have fallen due to the recession, but as the economy recovers, they will rise above the average level by the end of the decade.
Tax Receipts Return to Historical Average
12%
14%
16%
18%
20%
22%
24%
20.4% 20.6%19.3%
14.9%14.4%
1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Tax Revenue
30-Year Average: 18.0%
Tax Revenue
30-Year Average: 18.0%
Page 19
heritage.org• 2011 Budget Chart BookFederal Revenue Chart 6
White House Office of Management and Budget and the Tax Foundation.Source:
PERCENTAGE OF GDP
Percentage of GDP
income-tax-receipts
Tax cuts can create incentives for individuals to generate more income, which can generate more revenue. The most dramatic decline in the top individual income tax rate, from 70 percent to 28 percent, occurred during the Reagan Administration, during which tax receipts remained relatively constant as a share of the economy.
Increasing Tax Rates Does Not Necessarily Lead to Higher Income Tax Receipts
0%
20%
40%
60%
80%
100%
1960 1970 1980 1990 2000 20102011 figures estimated
91%
7.8%
70%
9.4%
50%
28%
39.6%35%
6.3%7.7%9.2%
Top Individual Tax Rate
IndividualTax Receiptsas % of GDP
Top Individual Tax Rate
IndividualTax Receiptsas % of GDP
Page 20
heritage.org• 2011 Budget Chart BookFederal Revenue Chart 7
Organisation for Economic Co-operation and Development.Source:
COMBINED CORPORATE TAX RATES
Combined Corporate Tax Rates (2000-2010)
corporate-tax-rate
High U.S. federal and state corporate tax rates make it difficult for businesses to compete internationally. While other countries are reducing corporate tax rates, the U.S. is virtually tied with Japan for the highest and has maintained rates significantly and consistently higher than the average of industrialized nations.
U.S. Corporate Tax Rate Is Uncompetitive
25%
30%
35%
40%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
United States: 39%
OECDAverage
United States: 39%
OECDAverage
32.9%31.9%
30.7%30.2%
29.3%28.2%
27.6%27.2%
26.2% 26.0% 26.0%
Page 21
heritage.org• 2011 Budget Chart BookFederal Revenue Chart 8
Heritage Foundation calculations based on Congressional Budget Office and White House Office of Management and Budget data.Source:
PERCENTAGE OF GDP
Percentage of GDP
total-tax-burden
Taxes are projected to increase rapidly under various policy scenarios. If the 2001 and 2003 tax cuts expire and more middle-class Americans are required to pay the alternative minimum tax (AMT), taxes will reach unprecedented levels. The tax burden will climb even if those tax breaks are extended. President Obama’s budget, which cuts some taxes and raises others, also increases the overall tax burden.
Total Tax Burden Is Rising to Highest Level in History
1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055
14%
16%
18%
20%
22%
24%
26%
28%Tax Cuts Expire
Obama’s Budget
Permanent Tax Cuts and Fix AMT
Highest Tax Burden in U.S. History: 20.6%
(2000)
Highest Tax Burden in U.S. History: 20.6%
(2000)
30-Year Historical Tax Burden:
(1981–2010): 18%
30-Year Historical Tax Burden:
(1981–2010): 18%
Excessive spending has created record levels of deficits and debt, and the worst is yet to come.
Debt and Deficits
heritage.or• 2011 Budget Chart BookDebt and Deficits Chart 3
W hite House O ffice of M anagem ent and Budget and Congressional Budget O ffice.Source:
INFLATION-ADJUSTED DOLLARS (2010)
Inflation-Adjusted Billions of Dollars (2010)
budget-net-interest-spending
As the national debt grows, interest payments will consume more and more of the federal budget. Under the President’s budget, the national debt would double and real net interest costs would more than triple over the next decade.
Net Interest Spending Will More Than Triple Over the Next Decade
$0
$200 billion
$400 billion
$600 billion
$800 billion
$282.4 billion
$188.7 billion
$773.9 billion
1990 1995 2000 2005 2010 2015 2020
$282.4 billion$282.4billion$$ oobb nnlilillililii.4422 22$ 8 4 ili
$188.7 billion
$773.9 billion$7739billi$$ billiob337777 .99 linlilil$ ililiii
Actual Projected
heritage.or• 2011 Budget Chart BookDebt and Deficits Chart 6
W hite House O ffice of M anagem ent and Budget.Source:
U.S. DEBT LIMIT
Billions of Dollars
increases-us-debt-limit
Congress has raised the amount of federal debt subject to a statutory limit roughly seventy-eight times since 1940, sometimes multiple times per year. Since 1990, the debt limit has seen an average year-to-year increase of 7.8 percent and a total increase of $10.1 trillion.
Rising Deficits Drive U.S. Debt Limit Higher, Faster
$0
$5 trillion
$10 trillion
$15 trillion
0
n
n
1940 1950 1960 1970 1980 1990 2000 2010
1946–1953: $275 billion
1997–2002: $5.95 trillion
1990: $4.1 trillion(largest percentage increase: +33%)
Change from 2009 to 2010: +$1.9 trillion (largest annual dollar increase)
Change from 2007 to 2009: +$2.6 trillion
$14.29 trillion
heritage.or• 2011 Budget Chart BookDebt and Deficits Chart 5
O rganisation for Econom ic Co-operation and Developm ent and Congressional Budget O ffice (Alternative Fiscal Scenario).Source:
PROJECTED U.S. PUBLICLY HELD DEBT AS PERCENTAGE OF GDP
Percentage of GDP
us-debt
Countries like Greece and Portugal have suffered or are anticipating financial crises as a result of mounting debt. If the U.S. continues federal deficit spending on its current trajectory, it will face similar economic woes.
U.S. Debt on Track to Fuel Economic Crisis
0%
50%
100%
150%
200%
Japan: 178%
U.K.: 61.3%
2000 2005 2010 2015 2020 2025 2030 2035
U.K.: 61.3%
Greece: 109.6%
Portugal: 71%
Italy: 98%
Comparisons are to other nations’ 2008 levels of debt.
Page 24
heritage.org• 2011 Budget Chart BookDebt and Deficits Chart 1
Heritage Foundation calculations based on data from the U.S. Depar tment of the Treasury, Institute for the Measurement of Worth, Congressional Budget Office, and White House Office of Management and Budget.
Source:
PERCENTAGE OF GDP
Percentage of GDP
national-debt-skyrocket
In the past, wars and the Great Depression contributed to rapid but temporary increases in the national debt. Over the next few decades, runaway spending on Medicare, Medicaid, and Social Security will drive the debt to unsustainable levels.
National Debt Set to Skyrocket
0%
50%
100%
150%
200%
250%
300%
350%
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
108.6%
344%
World War II
War on Terrorism
World War I
The Great Depression
World War I
The Great Depression
100%
Page 25
heritage.org• 2011 Budget Chart BookDebt and Deficits Chart 2
U.S. Census Bureau and Congressional Budget Office (Alternative Fiscal Scenario).Source:
INFLATION-ADJUSTED DOLLARS (2010)
Inflation Adjusted Dollars (2010)
national-debt-burden
As Washington continues to spend more than it can afford, future generations of taxpayers will be on the hook for increasing levels of debt. The amount of debt per citizen will skyrocket.
Each American’s Share of National Debt Is Growing
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000 2050: $279,738
1970 1980 1990 2000 2010 2020 2030 2040 2050
Projected
2011: $31,8711970:
$6,291
2011: $31,8711970:
$6,291
2044: $206,771
2032: $103,827
Page 26
heritage.org• 2011 Budget Chart BookDebt and Deficits Chart 3
Congressional Budget Office and White House Office of Management and Budget.Source:
DEBT AS A PERCENTAGE OF GDP
Debt as a Percentage of GDP
obama-budget-debt
In 2008, publicly held debt as a percentage of the economy (GDP) was 40.3 percent, nearly four points below the postwar average. Since then, the debt has increased more than 50 percent, and the President’s FY 2012 budget would more than double it to 87.4 percent by 2021.
Obama’s Budget Would Send Federal Debt to Levels Not Seen Since World War II
0%
20%
40%
60%
80%
100%
120%
108.7%
Obama’sBudget
Average, 1946–2010: 43.8%
1940 1950 1960 1970 1980 1990 2000 2010 2020
87.4%
40.3%
Page 27
heritage.org• 2011 Budget Chart BookDebt and Deficits Chart 4
President’s Budget: Congressional Budget Office and White House Office of Management and Budget; Heritage Plan: Calculations by the Center for Data Analysis based on current projections, data provided by the Peter G. Peterson Foundation, and CDA policy models.
Source:
DEBT AS A PERCENTAGE OF GDP
Debt as a Percentage of GDP
obama-budget-worsens-debt
Spending in the President’s budget proposal for 2012 would drive the debt to 87 percent of the economy by 2021. In contrast, Saving the American Dream: The Heritage Plan to Fix the Debt, Cut Spending, and Restore Prosperity solves the debt problem through strong budget reforms, lowering debt to 58 percent of GDP in just 10 years.
Obama’s Budget Worsens Debt Problem, but The Heritage Plan Solves It
1980 1985 1990 1995 2000 2005 2010 2015 202020%
30%
40%
50%
60%
70%
80%
90%87.4%
58.2%26.1%
Average, 1981–2010:40.6%
Average, 1981–2010:40.6%
PRESIDENTOBAMA’S BUDGET
HERITAGE PLAN
Page 28
heritage.org• 2011 Budget Chart BookDebt and Deficits Chart 5
White House Office of Management and Budget.Source:
BUDGET DEFICITS AS A PERCENTAGE OF GDP, BY ADMINISTRATION
Budget Deficits As A Percentage of GDP, By Administration
budget-create-deficits
The President is responsible for submitting an annual budget to Congress and has the authority to veto legislation, including irresponsible spending. Most Administrations have run small but manageable deficits, but President Obama’s unprecedented budget deficits pose serious economic risks.
Obama’s Budget Would Deepen Already Unprecedented Deficits
–8%
–7%
–6%
–5%
–4%
–3%
–2%
–1%
0%Kennedy Johnson Nixon Ford Carter Reagan Bush Clinton Bush Obama
– 8.3%(est.)
–3.2%
– 0.1%
– 4.3%– 4.3%
–2.4%
–3.5%
–1.6%– 0.9%–1.0%
Page 29
heritage.org• 2011 Budget Chart BookDebt and Deficits Chart 6
Congressional Budget Office (Alternative Fiscal Scenario).Source:
PERCENTAGE OF GDP
Percentage of GDP
federal-budget-deficits
Recent budget deficits have reached unprecedented levels, but the future will be much worse. Unless entitlements are reformed, spending on Medicare, Medicaid, and Social Security will drive deficits to unmanageable levels.
Federal Budget Deficits Will Reach Levels Never Seen Before in the U.S.
–10%
0%
10%
20%
30%
40%
50%
60%
70%61.5%
–2.4%
9.9%
1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2084
Average Historical
Deficit: 3.0%
Average Historical
Deficit: 3.0%
Page 30
heritage.org• 2011 Budget Chart BookDebt and Deficits Chart 7
Congressional Research Service and White House Office of Management and Budget (Table 7.3, Historical Tables).Source:
U.S. DEBT LIMIT
Billions of Dollars
increases-us-debt-limit
Congress first placed a statutory limit on total federal debt in 1917, in the Second Liberty Bond Act. Since 1962, Congress has altered the debt limit through 74 separate measures, raising it 10 times since 2001. Since 1990, the debt limit has been raised a total of $10.1 trillion, but nearly half of that increase has occurred since September 2007.
Rising Deficits Drive U.S. Debt Limit Higher, Faster
$0
$5 trillion
$10 trillion
$15 trillion
1940 1950 1960 1970 1980 1990 2000 2010
1946–1953: $275 billion
1997–2002: $5.95 trillion
1990: $4.1 trillion(largest percentage increase: +33%)1940:
$50 billion
Change from 2009 to 2010: +$1.9 trillion (largest annual dollar increase)
Change from 2007 to 2009: +$2.6 trillion
$14.29 trillion
Page 31
heritage.org• 2011 Budget Chart BookDebt and Deficits Chart 8
Organisation for Economic Co-operation and Development and Congressional Budget Office (Alternative Fiscal Scenario).Source:
PROJECTED U.S. PUBLICLY HELD DEBT AS PERCENTAGE OF GDP
Percentage of GDP
us-debt
Countries like Greece and Portugal have suffered or are anticipating financial crises as a result of mounting debt. If the U.S. continues federal deficit spending on its current trajectory, it will face similar economic woes.
U.S. Debt on Track to Fuel Economic Crisis
0%
50%
100%
150%
200%
Japan: 178%
U.K.: 61.3%
2000 2005 2010 2015 2020 2025 2030 2035
Greece: 109.6%
Portugal: 71%
Italy: 98%
Comparisons are to other nations’ 2008 levels of debt.
Page 32
heritage.org• 2011 Budget Chart BookDebt and Deficits Chart 9
White House Office of Management and Budget and Congressional Budget Office.Source:
INFLATION-ADJUSTED DOLLARS (2010)
Inflation-Adjusted Billions of Dollars (2010)
budget-net-interest-spending
As the national debt grows, interest payments will consume more and more of the federal budget, even without interest rate increases. Under the President’s budget, the national debt would double and real net interest costs would more than triple over the next decade.
Net Interest Spending Will More Than Triple Over the Next Decade
$0
$200 billion
$400 billion
$600 billion
$800 billion
$282.4 billion
$188.7 billion
$773.9 billion
1990 1995 2000 2005 2010 2015 2020
Actual Projected
Page 33
heritage.org• 2011 Budget Chart BookDebt and Deficits Chart 10
White House Office of Management and Budget.Source:
BILLIONS OF DOLLARS (2010)
Billions of Dollars (2010)
interest-spending
In 2010, the U.S. spent more on interest on the national debt than it spent on many federal departments, including Education and Veterans Affairs.
In One Year, Spending on Interest on the National Debt Is Greater Than Funding for Most Programs
$0
$200
$400
$600
$800
Department of Defense
Interest Expense
Department of Labor
Department of
Agriculture
Department of Veterans
Affairs
Department of Education
$666.7
$414.0
$173.1 $129.5 $108.3 $92.9
$666.7
$414.0
$173.1 $129.5 $108.3 $92.9
Medicare, Medicaid, and Social Security spending is on course to explode, placing enormous pressure on the budget.
Entitlements
heritage.or• 2011 Budget Chart BookEntitlem ents Chart 2
Congressional Budget O ffice.Source:
PERCENTAGE OF GDP
Percentage of GDP
entitlement-spending-double
Spending on Medicare, Medicaid and the Obamacare subsidy program, and Social Security will soar as 78 million baby boomers retire and health care costs climb. Total spending on federal health care programs will triple.
Entitlement Spending Will More Than Double by 2050
0%
5%
10%
15%
20%
Social Security
Total
Medicaid, O bamacare Subsidy Program
Medicare
2.7%
1.5%
4.2%
2005
8.3%
3.6%
1.9%
4.8%
2010
10.3%
4.1%
2.8%
5.2%
2020
12.1%
5.2%
3.5%
6.0%
2030
14.7%
6.6%
4.2%
6.1%
2040
16.9%
7.6%
4.7%
5.9%
2050
18.2%
heritage.or• 2011 Budget Chart BookEntitlem ents Chart 6
Heritage Foundation calculations based on Congressional Budget O ffice data.Source:
PERCENTAGE OF GDP
Percentage of GDP
defense-spending-entitlement-spending-problem
Long-term deficits are the result of unsustainable levels of spending on entitlement programs. Rather than tackle them directly, some would cut defense. But even if spending on this crucial national priority was eliminated completely, entitlements would continue to drive deficits to unmanageable levels.
Even Eliminating Vital Defense Spending Completely Would Not Solve the Entitlement Spending Problem
0%
5%
10%
15%
20%
25%
30%
35%
1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Historical Revenue: 18%All O ther SpendingSocial SecurityMedicaid, O bamacare Subsidy ProgramMedicare
Net Interest
Defense
Actual Revenue
Total Spending
Total Spending, W ith No Defense Spending Beginning in 2012
Total Spending
Total Spending, W ith No Defense Spending Beginning in 2012
heritage.org• 2011 Budget Chart BookEntitlem ents Chart 5
W hite House O ffice of M anagem ent and Budget.Source:
ANNUAL SPENDING (2011)
Annual Spending (2011)
discretionary-spending-cuts
Annual spending on entitlement programs is massive compared to other federal spending priorities. Cutting discretionary spending is a necessary step, but cuts to foreign aid alone or pulling out of Afghanistan will not close the deficit. Entitlement spending must be reined in.
Discretionary Spending Cuts Alone Are Not an Adequate Substitute for Entitlement Reform
$159.3 billion
Global W ar on Terrorism
$28.6 billion
ForeignAid
$19.5 billionNASA
$2.4 trillion
Entitlements(Medicare, Medicaid, Social Security, and other mandatory
programs)
N ote: Figure for entitlem ents includes net interest. W ithout net interest, the total is $2.2 trillion.
Page 36
heritage.org• 2011 Budget Chart BookEntitlements Chart 1
Congressional Budget Office.Source:
PERCENTAGE OF GDP
Percentage of GDP
entitlements-historical-tax-levels
If the average historical level of tax revenue is extended, spending on Medicare, Medicaid and the Obamacare subsidy program, and Social Security will consume all revenues by 2049. Because entitlement spending is funded on autopilot, no revenue will be left to pay for other government spending, including constitutional functions such as defense.
Entitlements Will Consume All Tax Revenues by 2049
0%
5%
10%
15%
20%
25% 2049: Entitlements 18.2% of GDP
3.9%
24.2%
30-Year Average Tax Revenue: 18.0%
Tax Revenue
30-Year Average Tax Revenue: 18.0%
Tax Revenue
1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080
Social Security
Medicaid, Obamacare Subsidy Program
Medicare
Page 37
heritage.org• 2011 Budget Chart BookEntitlements Chart 2
Congressional Budget Office.Source:
PERCENTAGE OF GDP
Percentage of GDP
entitlement-spending-double
Spending on Medicare, Medicaid and the Obamacare subsidy program, and Social Security will soar as 78 million baby boomers retire and health care costs climb. Total spending on federal health care programs will triple.
Entitlement Spending Will More Than Double by 2050
0%
5%
10%
15%
20%
Social Security
Total
Medicaid, Obamacare Subsidy Program
Medicare
2.7%
1.5%
4.2%
2005
8.3%
3.6%
1.9%
4.8%
2010
10.3%
4.1%
2.8%
5.2%
2020
12.1%
5.2%
3.5%
6.0%
2030
14.7%
6.6%
4.2%
6.1%
2040
16.9%
7.6%
4.7%
5.9%
2050
18.2%
Page 38
heritage.org• 2011 Budget Chart BookEntitlements Chart 3
Congressional Budget Office (Alternative Fiscal Scenario).Source:
PERCENTAGE OF GDP
Percentage of GDP.
medicare-spending-deficits
Entitlement spending is the main cause of long-term runaway deficits. While reform must address spending within each program, Medicare is the largest driver due to the effects of an aging population and rising health care costs.
Medicare Spending Is Adding to Future Deficits Faster Than Other Program Spending
0%
3%
6%
9%
12%
15%
2010 2015 2020 2025 2030 2035 2040 2045 2050
Other Non-Interest Spending
Social SecurityMedicaid, Obamacare Subsidy Program
Medicare
Page 39
heritage.org• 2011 Budget Chart BookEntitlements Chart 4
Congressional Budget Office (Alternative Fiscal Scenario).Source:
PERCENTAGE OF GDP
Percentage of GDP
entitlements-consume-economy
The major entitlements—Medicare, Medicaid, the Obamacare subsidy program, and Social Security— are on track to push spending to unsustainable levels. These programs must be reformed in order to improve the long-term budget outlook.
Without Entitlement Reform, Federal Spending Could Consume One-Half of the Economy by 2056
0%
10%
20%
30%
40%
50%
60%
53.7%2056: 50.1%
All Other SpendingDefenseSocial Security
Medicaid, Obamacare Subsidy Program
Medicare
Net Interest
2000 2010 2020 2030 2040 20502005 2015 2025 2035 2045 2055 2060
Average Revenue,
2000–2009: 18.0%
Actual Revenue
Average Revenue,
2000–2009: 18.0%
Actual Revenue
Page 40
heritage.org• 2011 Budget Chart BookEntitlements Chart 5
Congressional Budget Office.Source:
PERCENTAGE OF GDP
Percentage of GDP
repealing-tax-cuts
Some argue for allowing the 2001 and 2003 tax cuts to expire, including subjecting the middle class to the alternative minimum tax in order to balance the budget. Under this scenario, unaffordable deficit spending would still continue, and economic growth and job creation would suffer.
Letting Tax Cuts Expire Will Not Balance the Budget
0%
5%
10%
15%
20%
25%
30%
35%
All Other Spending
Defense
Social Security
Medicaid, Obamacare Subsidy Program
Medicare
Net Interest
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055
Historical Revenue: 18.0%
Historical Revenue: 18.0% Revenue
Deficit Spending
TotalSpending
TotalSpending
Page 41
heritage.org• 2011 Budget Chart BookEntitlements Chart 6
Congressional Budget Office.Source:
MARGINAL INCOME TAX RATES
Marginal Income Tax Rates
entitlements-double-tax-rates
The cost of Medicare, Medicaid, and Social Security is rising substantially. Paying for this spending solely through federal income tax increases would require more than a twofold increase of current tax rates, even for the lowest tax bracket.
Hiking Taxes to Pay for Entitlements Would Require Doubling Tax Rates
0%
20%
40%
60%
80%
100%
Lowest Bracket2010 2050 2082
Middle Bracket2010 2050 2082
Highest Bracket2010 2050 2082
Corporate Taxes2010 2050 2082
10%19%
25% 25%
47%
63%
35%
66%
88%
35%
66%
88%
Page 42
heritage.org• 2011 Budget Chart BookEntitlements Chart 7
Internal Revenue Service and Congressional Budget Office (Alternative Fiscal Scenario).Source:
CURRENT TAX RATE AND TAX RATE NECESSARY TO CLOSE DEFICIT
Current tax rate and Tax rate necessary to cover deficit
tax-wealthy-deficits
Some argue for taxing only the wealthy to raise revenues and reduce federal deficits. However, hiking taxes on these taxpayers would increase their tax rates to mathematically impossible levels. To close the 2035 deficit, the top two rates would increase to 139 percent and 150 percent, and in 2050 they would reach 206 percent and 223 percent.
Taxing the Wealthy to Cover Future Deficits Won’t Work
0%
50%
100%
150%
200%
250%
Current Rate
2021 2035 2050 Current Rate
2021 2035 2050To Close Future Deficits To Close Future Deficits
SECOND-HIGHEST BRACKET HIGHEST BRACKET
33%
65%
139%
206%
35%
70%
150%
223%
33%
65%
139%
206%
35%
70%
150%
223%
Page 43
heritage.org• 2011 Budget Chart BookEntitlements Chart 8
Heritage Foundation calculations based on Congressional Budget Office data (Alternative Fiscal Scenario).Source:
PERCENTAGE OF GDP
Percentage of GDP
balancing-budget
America is running massive deficits, and a balanced budget requirement is often considered a way to rein in red ink. Without serious entitlement and other spending reforms, the level of taxes required to balance the federal budget would reach economically stagnating levels.
Balancing the Budget Without Cutting Spending Would Cause Taxes to Skyrocket
0%
5%
10%
15%
20%
25%
30%
1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055
Actual Spending With Balanced Budget
30.8%
Revenue
All Other Spending
Social Security
Medicaid, Obamacare Subsidy Program
Medicare
Net Interest
Page 44
heritage.org• 2011 Budget Chart BookEntitlements Chart 9
White House Office of Management and Budget.Source:
ANNUAL SPENDING (2011)
Annual Spending (2011)
spending-cuts
Annual spending on entitlement programs is massive compared to other federal spending priorities. Cutting discretionary spending is a necessary step, but cuts to foreign aid alone or pulling out of Afghanistan will not close the deficit. Entitlement spending must be reined in.
Discretionary Spending Cuts Alone Are Not an Adequate Substitute for Entitlement Reform
$2.4 trillion
Entitlements(Medicare, Medicaid, Social Security, and other mandatory
programs)
Notes: Figure for entitlements includes net interest. Without net interest, the total is $2.2 trillion. Figure for Corporation for Public Broadcasting reflects the annualized level provided by the continuing resolution (P.L. 111–242).
$159.3 billion
Global War on Terrorism
$28.6 billion
ForeignAid
$19.5 billion
NASA$516
million
Corporation for Public
Broadcasting
Page 45
heritage.org• 2011 Budget Chart BookEntitlements Chart 10
Heritage Foundation calculations based on Congressional Budget Office data.Source:
PERCENTAGE OF GDP
Percentage of GDP
defense-spending-entitlement-spending-problem
Long-term deficits are the result of unsustainable levels of spending on entitlement programs. Rather than tackle them directly, some would cut defense. But even if spending on this crucial national priority was eliminated completely, entitlements would continue to drive deficits to unmanageable levels.
Even Eliminating Vital Defense Spending Completely Would Not Solve the Entitlement Spending Problem
0%
5%
10%
15%
20%
25%
30%
35%
1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Historical Revenue: 18%All Other SpendingSocial SecurityMedicaid, Obamacare Subsidy ProgramMedicare
Net Interest
Defense
Actual Revenue
Total Spending
Total Spending, With No Defense Spending Beginning in 2012
Total Spending
Total Spending, With No Defense Spending Beginning in 2012
Page 46
heritage.org• 2011 Budget Chart BookEntitlements Chart 11
Current projections: Congressional Budget Office (Alternative Fiscal Scenario). Heritage Plan: Calculations by the Center for Data Analysis based on data provided by the Peter G. Peterson Foundation. For more information, go to savingthedream.org.
Source:
REVENUE AND SPENDING AS A PERCENTAGE OF GDP
Revenue and Spending as a Percentage of GDP
saving-american-dream
By rapidly lowering total federal spending, Saving the American Dream: The Heritage Plan to Fix the Debt, Cut Spending, and Restore Prosperity would balance the budget by 2021 and keep it there permanently, without raising taxes.
The Alternative: Saving the American Dream
CURRENT PROJECTIONS HERITAGE PLAN
10%
15%
20%
25%
30%
35%
2010 2015 2020 2025 2030 203510%
15%
20%
25%
30%
35%
2010 2015 2020 2025 2030 2035
35.2%
19.3%
17.7%
18.5%
Spending
RevenueSpending
Revenue
Page 47
heritage.org• 2011 Budget Chart BookEntitlements Chart 12
Current projections: Congressional Budget Office (Alternative Fiscal Scenario). Heritage Plan: Calculations by the Center for Data Analysis based on data provided by the Peter G. Peterson Foundation. For more information, go to savingthedream.org.
Source:
PUBLICLY HELD DEBT AS A PERCENTAGE OF GDP
Publicly Held Debt as a Percentage of GDP
heritage-plan-debt
Without significant spending reforms, the national debt is projected to reach 185 percent of GDP by 2035. Under the Heritage plan, federal spending would be reduced by about half, which would dramatically lower the debt to 30 percent.
The Heritage Plan Would Reverse Trajectory of Unsustainable Debt
2010 2015 2020 2025 2030 20350%
50%
100%
150%
200%
CURRENT PROJECTIONS
HERITAGE PLAN
185%
30%
By 2023, our national debt is projected to
reach 100 percent of the economy
By 2023, our national debt is projected to
reach 100 percent of the economy
Page 48
heritage.org• 2011 Budget Chart BookEntitlements Chart 13
Current projections: Congressional Budget Office (Alternative Fiscal Scenario). Heritage Plan: Calculations by the Center for Data Analysis based on data provided by the Peter G. Peterson Foundation. For more information, go to savingthedream.org.
Source:
REVENUE AND SPENDING AS A PERCENTAGE OF GDP
Revenue and Spending as aPercentage of GDP
heritage-plan-fiscal
Bold, transformational reforms are needed to solve America’s spending crisis. The Heritage Plan achieves this through spending, entitlement, and tax reforms. It reduces the size of government, encourages personal fiscal responsibility, and fosters economic growth. It balances the federal budget by 2021 and keeps revenue at 18.5 percent of the economy.
The Heritage Plan Keeps Spending Low and Ends Deficits Without Raising Taxes
0%
5%
10%
15%
20%
25%Total SpendingTotal Revenue
2010 2015 2020 2025 2030 2035
All Other Spending
Defense
Entitlements
Net Interest
Balanced Budget by 2021
Page 49
The charts in this book are based primarily on data available as of March 2011 from the Office of Manage-ment and Budget (OMB) and the Congressional Budget Office (CBO). The charts using OMB data display the historical growth of the federal government to 2010 while the charts using CBO data display both historical and projected growth from as early as 1940 to 2084. Projections based on OMB data are taken from the White House Fiscal Year 2012 budget.
The charts provide data on an annual basis except where calculations are made for Administration averages. Debt limit data are based on the limit in effect at the end of the calendar year. All spending and revenue data are based on a fiscal year. For simplicity, these are displayed as calendar years in the charts. Prior to 1976, the fiscal year was from July 1 to June 30. Following that year, the current format of October 1 to September 30 was implemented. In the charts, the transition is omitted for clarity. Also, in all charts in which spending or revenue is measured by taxpayer, taxpayers are counted as the number of individual income tax returns filed (according to data from the Internal Revenue Service) per year. Thus, married couples that both work but file a joint return are counted as a single combined-income unit. Most of the data are adjusted for inflation in 2010 dollars. Specific information regarding data sources is indicated at the bottom of each chart.
Charts designating Presidential Administrations begin with the fiscal year in which the Administration pre-sented its first budget. In the case of 2009, an atypical year in which much was spent before the Administration’s first fiscal year budget (FY2010), all revenue and spending up to the CBO January 2009 “Budget and Economic Outlook” is attributed to President Bush. All revenue and spending thereafter is attributed to President Obama.
Technical Notes
Emily GoffResearch Assistant
Thomas A. Roe Institute for Economic Policy Studies
Kathryn NixPolicy Analyst
Center for Health Policy Studies and Thomas A. Roe Institute for Economic Policy Studies
John FlemingSenior Data Graphics Editor
Authors
Our national debt equals nearly 70 percent of GDP and is rapidly growing. Medicare and Social Security face $40 trillion in long-term unfunded obligations.
We cannot leave these burdens for our children and grandchildren. We must begin now to solve these problems.
In Saving the American Dream, experts at The Heritage Foundation offer a detailed plan to redesign entitlement programs, simplify taxes, make health care affordable, and end government overreach.
The result? The Heritage plan would balance the budget within 10 years—and keep it balanced permanently.
“Together, let us seize the moment, change our country’s course, and save the American Dream.”—Dr. Edwin J. Feulner, President, The Heritage Foundation
See the complete plan—plus many ways to share it with charts, videos, and more—at SavingTheDream.org.
The Budget Chart Book is available at heritage.org/BudgetChartBook. Check out the following features:
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