rising debt: sinking our future?
DESCRIPTION
Presenation by Sara Imhof, Midwest Regional Director, as presented at "Rising Debt: Sinking our Future" Conference at SIUC, October 18, 2010TRANSCRIPT
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presented by
Sara Imhof, Midwest Regional Director
THE CONCORD COALITION www.concordcoalition.org
Rising Debt: Sinking our Future?
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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)
Source: Congressional Budget Office, January 2010.
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Change in Composition of Discretionary Spending
68%32%
60%40%
50% 50%
Defense Non-defense
Source: Congressional Budget Office, January 2010.
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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
Source: Congressional Budget Office, January 2010.
As
a P
erce
nta
ge o
f G
DP
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Outlays of Select Non-Defense Discretionary Programs (FY 2010 Projected)
Source: Congressional Budget Office, January 2010.
*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
Source: Congressional Budget Office, January 2010.
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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?