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G enerational Outlook: The Federal Budget Now and in the Future presented by Joshua Gordon, Policy Director. THE CONCORD COALITION www.concordcoalition.org. Interest. Domestic*. Estate & Gift Taxes ($11 billion). Defense. Other Taxes. Corporate Taxes. Other Mandatory.
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Generational Outlook: The Federal Budget Now and in the Future presented by Joshua Gordon, Policy Director THE CONCORD COALITIONwww.concordcoalition.org
Interest Domestic* Estate & Gift Taxes ($11 billion) Defense Other Taxes Corporate Taxes Other Mandatory Social Insurance Taxes Medicare & Medicaid Individual Income Taxes Social Security Composition of Projected FY 2012 Federal Government Revenues and Outlays(Deficit: $1.128 Trillion) $1,159 $769 Revenues: $2.44 trillion Outlays: $3.56 trillion *Includes all appropriated domestic spending such as education, transportation, homeland security, housing assistance and foreign aid. Source: Congressional Budget Office, August 2012.
Current Policy Trends Lead to Large Sustained DeficitsFiscal Years 2013-2022 -$2.3 Trillion Deficit Billions of Dollars -$9.7 Trillion Deficit CBO August 2012 Baseline The Concord Coalition Plausible Baseline assumes that the $1.2 trillion “Super Committee” trigger does not go into effect, that discretionary spending grows at the rate of inflation, that war costs slow gradually, that Medicare physician payment cuts are postponed, and that all expiring tax provisions are extended with AMT relief, other than the payroll tax holiday. Source: Congressional Budget Office, August 2012 and Concord Coalition analysis.
Debt Held by the Public as a Percentage of GDP 1940-2040 Actual Projected As a Percentage of GDP World War II 109% 2012 72.6% Source: GAO Analysis, Spring 2012 and OMB Historical Tables 2012.
Net Interest Discretionary Mandatory Automatic expenditures are consuming a growing share of the budget 1972 1992 2012* 2022* 37% 39% 25% 56% 47% 36% 58% 64% 11% 7% 14% 6% *Projected Source: Congressional Budget Office, March 2012.
Tax Expenditures: A Comparative AnalysisFiscal Year 2011 Revenues collected from Individual Income and Corporate Taxes Costs of Individual and Corporate Tax Expenditures Source:Congressional Budget Office, Budget and Economic Outlook: Update, August 2011, Joint Committee on Taxation, JCX-15-11, February 28, 2011, and Tax Policy Center, Trends in Tax Expenditures, Rogers and Toder, September 16, 2011.
Largest Tax ExpendituresFiscal Years 2010-2014 Billions of Dollars Tax expenditures are any reduction in income tax liabilities that result from special tax provisions or regulations that provide tax benefits to particular taxpayers. These special income tax provisions are referred to as tax expenditures because they may be considered analogous to direct outlay programs. Source: Joint Committee on Taxation, JCX-15-11, February 28, 2011.
Sources of Growth in the Federal Budget Fiscal Years 2012-2035 Current Individual Income Taxes = 7.2% Medicare Interest Current Defense Spending = 4.4% Medicaid* Social Security All Other Noninterest Spending *Includes outlays for CHIP and exchange subsides. . Source: Congressional Budget Office. Long-Term Budget Outlook, Alternative Fiscal Scenario, June 2012.
Factors Explaining Future Federal Spending on Medicare, Medicaid, and Social Security Source: Congressional Budget Office, June 2010 & 2011.
CBO’s Estimate of the Economic Impact of FY2013 Deficit Reduction if Done Permanently • Between FY 2012 and FY 2013, deficit reduced by $560 billion (3.7% GDP); $65 billion (13% of policy change) from the sequester • For the full calendar year 2013, deficit reduction = 4.7% of GDP • Economic growth would contract by 1.3% in first half of 2013entering the US into a recession (compared to 5.3% growth with no deficit reduction) • Full year growth would be 0.5% of GDP (compared to 4.4% of GDP) • Over the longer-term, GDP growth would be higher under the deficit reduction scenario.
Overview of the Budget Control Act of 2011 • Increased the debt ceiling • Ten year discretionary spending caps (saves $900 billion) • Creation of Joint Select Committee on Deficit Reduction --the Super Committee • Committee failed -- triggers sequestration of $1.2 Trillion over 10 years. • Sequestration split about 50-50 between defense and non-defense. • $109 billion total in 2013
The Trigger: What Gets Cut? Source: Congressional Budget Office, 2011.
Defense Discretionary Spending as a Percentage of GDP Projected As a Percentage of GDP Source: Congressional Budget Office, August 2012.
Domestic Discretionary Projected to be Cut DramaticallyFiscal Years 2013-2022 Percent of GDP Source: Congressional Budget Office, January 2011, August 2012 and Concord Coalition analysis.
CBO on the ‘Fiscal Cliff’: “If policymakers wanted to minimize the short-run costs of narrowing the deficit very quickly while also minimizing the longer-run costs of allowing large deficits to persist, they could enact a combination of policies: changes in taxes and spending that would widen the deficit in 2013 relative to what would occur under current law but that would reduce deficits later in the decade relative to what would occur if current policies were extended for a prolonged period.”