Rising Debt: Sinking our Future?

www.concordcoalition.orgTHE CONCORD

COALITION

presented by

Sara Imhof, Midwest Regional Director

THE CONCORD COALITION www.concordcoalition.org

Rising Debt: Sinking our Future?


COALITION

About The Concord Coalition

The Concord Coalition is a nationwide, non-partisan, grassroots

organization advocating generationally responsible fiscal policy. The

Concord Coalition was founded in 1992 by the late former Senator Paul

Tsongas (D-Mass.), former Senator Warren B. Rudman (R-N.H.) and

former U.S. Secretary of Commerce Peter Peterson. Former Senator Bob

Kerrey (D-Ne.) became co-chair of the Concord Coalition in January

2002.


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Current Fiscal Policy

$1,800

$1,600

$1,400

$1,200

$1,000

$800

$600

$400

$200

$0In b

illi

ons

of 1

996

cons

tant

(ch

ain)

dol

lars

1980 1984 1988 1992 1996 2000 2004 2008 2012 2016

Fiscal Years


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Gross National Debt1980-2010

Source: Office of Management and Budget 2010.


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Debt Held by the Public as a Percent of GDP 1940-2010

Source: OMB Historical Tables 2009.

As

a P

erce

ntag

e of

GD

P


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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%


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National Saving Is Very Low by Historical Standards

Source: BEA, NIPA Tables 1.1.5 and 5.1 (2010).


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Estate & Gift Taxes($21 billion)

Composition of Projected FY 2010 Federal Government Revenues and Outlays(Deficit: $1.34 Trillion)

Interest

Domestic*

Social Security

Medicare & Medicaid

Other Entitlements

Defense

Other TaxesCorporate Taxes

Social Insurance Taxes

Individual Income Taxes

Outlays: $3.49 trillion Revenue: $2.14 trillion*Includes all appropriated domestic spending such as education, transportation, homeland security, housing assistance, and foreign aid.

Source: CBO August 2010.


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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


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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


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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


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Without reforms, by 2022, future revenues will only cover Social Security, Medicare, Medicaid, and interest on the debt. By 2046, revenues won’t even cover interest costs.

5


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Social Security, Medicare, & Medicaid as a Percentage of the Federal Budget

All other Federal Spending

$2.07 Trillion

59%

Social Security, Medicare and Medicaid

$1.42 Trillion

41%

Source: Congressional Budget Office, August 2010.


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62% 31%

7%

40%

15%

45% 39%

6%

55%

Mandatory DiscretionaryNet Interest

Source: Congressional Budget Office, January 2010.

Mandatory spending is consuming a growing share of the budget

1970 1990 2010


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Outlays of Select Mandatory Spending Programs (FY 2010 Projected)



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Change in Composition of Discretionary Spending

68%32%

60%40%

50% 50%

Defense Non-defense



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Defense Discretionary Spending as a Percentage of GDP

Source: Congressional Budget Office, August 2010.

As

a P

erce

nta

ge o

f G

DP


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Projected Growth in Entitlement Spending far Greater than Defense Spending

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


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Non-Defense Discretionary Spending as a Percentage of GDP


As

a P

erce

nta

ge o

f G

DP


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Outlays of Select Non-Defense Discretionary Programs (FY 2010 Projected)


*includes ground, air, and water

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


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Automatic Growth Rate in the Big Three Entitlements Swamps Growth of Appropriations

Projected Annual Growth Rate in Social Security, Medicare and Medicaid

Annual Growth Rate in Social Security, Medicare and Medicaid outlays

Plausible Annual Growth Rate in Discretionary Spending



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Americans Want to Cut Spending – But Not on the Programs That Cost the Most

Source: The Economist/YouGov Poll, April 2010 and Congressional Budget Office, January 2010.


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America’s Population is AgingPopulation age 65 and Over

Source: Social Security and Medicare Trustees’ Report, 2010.

Year

Per

cen

tage

of

Pop

ula

tion

Age

d 6

5 an

d O

ver


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Americans are living longer and having fewer children

Consequently, fewer workers are available

to support each Social Security recipient

1960: 5.1 to 1 Today: 3.1 to 1 2029: 2.2 to 1

Source: Social Security Administration, June 2010.


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Since its inception, the Social Security program has experienced more surpluses than deficits

7


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In 2015, OASDI will begin operating with a permanent cash flow deficit.

In the future, persistent cash deficits are projected for Social Security

8


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Health Care Costs are Rising Faster Than the Economy

Source: Congressional Budget Office, June 2009.

Per

cen

tage

of

GD

P

Historic Level of

Federal Revenues

Historic Level of

Federal Spending

Assumes that health care cost growth will not exceed GDP growth.

Assumes that health care cost growth continues at the average rate for the past 40 years (2.5 percentage points greater than GDP growth.)

Assumes that health care cost growth rate declines to 1.0 percentage point greater than GDP growth—consistent with the assumption used by the Medicare Trustees.


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Medicare’s Fiscal Future Relates to ALL of us

28


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U.S. spends much more, doesn’t get more

Source: UC Atlas of Global Inequality


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Medicare Costs Soar in the Coming Decades

Calendar Year

As

a P

erce

nta

ge o

f G

DP

General Revenues required to fund the program

Income from dedicated taxes, premiums, and state transfers

Source: Medicare Trustees’ Report, May 2009.


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Health Expenditures as a Percent of GDP(1960-2019)

*ProjectedSource: Centers for Medicare and Medicaid Services, September 2010.


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How Paying for Health Care Has Changed(1960-2008)

Source: Centers for Medicare and Medicaid Services.


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Almost three out of every ten Medicare dollars is spent for people who are in the last year of life

SOURCE: Data from the Center for Medicare & Medicaid Services, Office of the Actuary Last Year of Life Study. Compiled by PGPF.NOTE: Data estimated for 2009, the most recent available. *Decedents. **Survivors.

17


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Current fiscal policy is on an unsustainable path

Federal Outlays as a Percentage of GDP

Social Security

Medicaid

Medicare

All Other

Interest

Source: Government Accountability Office, 2010.

Average tax revenue


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Key Points of Agreementfrom across the aisle, various personal and political perspectives

• Current fiscal policy is unsustainable

• There are no easy solutions, such as cutting waste fraud and abuse or growing our way out of the problem.

• Finding solutions will require bipartisan cooperation and a willingness to discuss all options.

• Public engagement and understanding is vital in finding solutions.

• This is not about numbers. It is a moral issue.


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Popular Myths that Impede Action

• Myth: We can grow our way out of difficult budget choices.

• Myth: Eliminating waste in government programs will solve the deficit problem.

• Myth: The deficit problem can be solved by delivering health care more efficiently.

• Myth: We just need to raise taxes starting with rolling back some or all of the Bush tax cuts.

• Myth: Cutting taxes will increase revenues.


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Long-Term Solutions

• Mandatory spending drives the long-term problem

• Social Security – solutions are known, political will lacking

• More and more health care reform• Finish tax reform, might need to add-on (energy,

V.A.T.)


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How Can I Make a Difference?

• Visit www.concordcoalition.org to learn more about these fiscal issues and sign up for our weekly e-mail.

• Become a volunteer for the Concord Coalition and help us give the country a fiscal wake-up call.

• Discuss the issue of fiscal responsibility with friends, family, and other members of your community.

• Tell your Representative and Senators in Congress that we need strong leadership for fiscal responsibility.

• Take personal responsibility for your own retirement and start saving now.

• Become a Member of The Concord Coalition. We need your support!


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The Concord Coalition is the most respected voice of fiscally responsible policy because it is a collection of many voices.

We rely on your support to help us continue our role as non-partisan analysts, educators and advocates.

And, this year, your contribution goes further, as all new and increased gifts are matched dollar for dollar

by The Peter G. Peterson Foundation.

To make your gift, go to concordcoalition.org and click on


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Principles & Priorities Interactive Exercise

• Congratulations!

You are now a member of Congress assigned to special committees charged with finding ways to reduce the projected federal deficit.

• Consider– Economics: how will your decision affect the economy in the short term & long

term?

– Public Policy: what segment of the population wins or loses by your decisions (e.g., taxpayers, seniors, students, middle-class, sandwich generation, etc.)?

– Politics: will you be re-elected? Can you explain to your constituents why you made your decisions?


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Federal Revenue and Spending (FY2009)

Revenues $ Bil % Spending $ Bil %

Individual Income Taxes Health Care

Payroll Taxes (SI, Medicare, & FICA)

Social Security

Other Taxes National Defense

Corporate Income Taxes Income Security

Total Revenue Other

Interest

Education

Environmental

International Affairs

Total Outlays


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Federal Revenue and Spending (FY2009)

Revenues $ Bil % Spending $ Bil %

Individual Income Taxes 915 26 Health Care 764 22

Payroll Taxes (SI, Medicare, & FICA)

891 25 Social Security 683 19

Other Taxes 161 5 National Defense 663 19

Corporate Income Taxes 138 4 Income Security 534 15

Total Revenue 2105 60 Other 526 15

DEFICIT 1417 40 Interest 191 6

Education 78 2

Environmental 46 1

International Affairs 37 1

Total Outlays 3522 100


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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


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Your Personal Priorities• Health

– Medicare, Medicaid, safety-health inspections, veterans health

• International Affairs– Internat’l dev’t/humanitarian assistance, internat’l security assistance, conducting foreign affairs

and internat’l financial programs, etc.

• Income Security– Unemployment comp., housing assistance, food stamps, nutrition programs, gen’l

retirement/disability insurance (excluding SS), etc.

• Education• All Dept. of Education spending

• Interest– Interest on our debt (i.e., borrowed funds)

• Other– Domestic homeland security, science and space technology, NIH, postal service subsidies, job

training, general gov’t, etc.

• Tax/Spending– Tax increases, spending cuts, combination of both?


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Principles & Priorities

1) General Gov’t Spending– Options: 1 OR 2, 5, 7, 10, 12

2) National Defense / Homeland Security– Options: 15, 17, 20, 22

3) Revenues / Taxes– Options: 25 OR 26, 30

4) Entitlements (SS, Medicare, Medicaid)– Options: 33, 35, 37

• Calculate your expenditures or savings (p. 11)… (IGNORE #6)

• One person per committee to report out about fiscal policy decisions and group deliberations…


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Discussion

• How did your fiscal policy decisions reflect (or NOT) your previously stated priorities?– If not, which would you rather adjust your priorities or your fiscal

policy decisions?

• More taxes or less spending?

• Were you more concerned about SHORT-term problems or LONG-term problems?– Do you think most members of Congress are concerned with short-

or long-term problems?

• Hard to do? Empathy for your elected officials?

Rising Debt: Sinking our Future?

Education

Transcript of Rising Debt: Sinking our Future?